Carlsbad City Council
March 22, 2022

CITY COUNCIL
Staff Report
Meeting Date: March 22, 2022
To: Mayor and City Council
From: Scott Chadwick, City Manager
CA Review RK
Staff Contact: Jeff Murphy, Community Development Director [email protected] , 442-339-2783
Subject: Amendments to City Council Inclusionary Housing Policies and the City's Inclusionary Housing In-Lieu Fee (MCA2022-0002/PUB2022-0004) District: All
Recommended Action
That the City Council:

1. Adopt a resolution amending the city's inclusionary housing in-lieu fee (Exhibit 1)

2. Adopt a resolution consolidating and amending Council Policy statements Nos. 57, 58, and 68 into a single policy document, No. 57, to help streamline permit application, clarify confusing language, and memorialize longstanding processing practices relating to inclusionary housing compliance (Exhibit 2).

Executive Summary
When housing prices spiked in the 1990s, many cities looked for ways to help make housing more affordable. One such tool that Carlsbad and many other jurisdictions implemented was inclusionary housing regulations. Under these laws, developers are required to set aside a certain number of units within their residential development projects and make them affordable to lower income households. Developers of projects with six or fewer units may pay a fee in lieu of constructing these units. Proceeds from those fees are then used to financially support affordable housing units in other projects throughout Carlsbad.

In response to City Council motions and direction, staff are presenting options to increase the city's current inclusionary housing in-lieu fee for the City Council's consideration. Staff are also offering options to amend and consolidate three existing Council policy statements that affect inclusionary housing, statement nos. 57, 58, and 68, into a single policy document. This will streamline permit application, clarify confusing language, and memorialize longstanding processing practices relating to inclusionary housing compliance. This report also includes options that are recommended by the Housing Commission, though not supported by staff.

Council Policy Statement No. 1 states that all City Council policies may be adopted, amended, or rescinded only by a resolution receiving four affirmative votes from the City Council.

March 22, 2022 Item #4 Page 1 of 181

Discussion
Background
The City Council approved motions on Aug. 20 and Dec. 17, 2019, (Exhibits 3 and 4) directing staff to return to the City Council for consideration of initiating an analysis of the city's inclusionary housing program. On May 5, 2020, following a staff presentation on the topic, the City Council gave staff direction and funding for a study that would provide recommendations on updating the inclusionary housing in-lieu fee and the methodologies through which it is calculated, as well as related inclusionary housing policy options for all of Carlsbad, both inside and outside the area covered by the Village & Barrio Master Plan. This report provides an overview of the current inclusionary housing program and possible options and changes to streamline and improve upon the program.

Current Inclusionary Housing Program
Carlsbad, like many coastal cities in California, struggles with both housing shortage and housing affordability. To help overcome these challenges, the city's inclusionary housing ordinance, originally adopted in 1993, established the legal basis for requiring inclusionary housing in new residential development in the city. The law applies to all proposed development projects that include residential units. It requires that a minimum of 15% of the units within a project be affordable to lower-income households.

In-lieu fee
While the construction of affordable units is preferred, the city ordinance allows a developer of projects with six or fewer dwelling units to satisfy the projects' inclusionary requirements by paying a fee in-lieu of building the unit. When it was initially adopted, the in-lieu fee was formulated using the affordability gap method, meaning that the fee was based on the difference between the cost of constructing a market rate unit versus that of a lower-income affordable unit. The fee was initially set at $11,485 per market rate unit. The City Council recalculated the fee three years later, in 1996, reducing it to $4,515 per market rate unit. The in-lieu fee amount has remained unchanged since then.

In April 1993, the city established the Housing Trust Fund. All revenue from the payment of the in-lieu fee is deposited into the Housing Trust Fund. This fund also receives funding from other sources, with housing credit purchases, impact fees, loan interest payments and federal and state grants all contributing revenue toward the fund, with deposits totaling roughly $39.5 million — including $1.7 million in in-lieu fee payments — over the past 20 years.

Alternative means of compliance policies
The city understands that various constraints may frustrate a developer's ability to meet the strict letter of the city's inclusionary housing regulations. That's why the Inclusionary Housing Ordinance allows for the City Council to authorize "alternative means of compliance" when it is found that the proposed alternative meets the intent of the city's inclusionary housing ordinance and the goals and policies of the city's Housing Element.1 To help identify acceptable alternative measures, three council policy statements were adopted (Exhibits 5-7):
• Policy No. 57 provides allowances for building affordable units offsite 'The Housing Element is the part of the city's General Plan that sets policies and goals intended to meet the housing needs of everyone in the community, as required by state law.

March 22, 2022 Item #4 Page 2 of 181

Possible rates outside VBMP Possible rates inside VBIVIP

Flat fee Fee per Fee per Flat fee Fee per Fee per
$4,515 $8,5291 per unit sq foot' sq foot 2 per unit sq foot 2 sq foot' $31,240 $15 $25 $34,490 $25 $35
• Policy No. 58 sets forth the credit purchase program through which applicants can buy credits instead of building the required inclusionary units • Policy No. 68 allows for a reduction in the 15% inclusionary requirement when certain standards are met
Program success
About 2,500 affordable units have been built in the past 25 years because of the city's Inclusionary Housing Ordinance, the Housing Trust Fund, and alternative measures. Put another way, from 1995 to 2020, the city produced more than 19,000 housing units, of which roughly 13% were made affordable through the inclusionary housing program. In the past two years alone, a total of 812 housing units were approved, of which 116 were made affordable for lower income families.

Options for in-lieu fee amendment
In April 2021, Keyser Marston Associates Inc., or KMA, the consulting firm the city hired to conduct a financial analysis of these fees, finalized its report, the Inclusionary Housing In-Lieu Fee Update Report (Exhibit 7). The firm reviewed the city's existing inclusionary regulations and historical results in terms of the production of housing units and revenue from the in-lieu fee, and then combined data pertaining to the inclusionary housing in-lieu fees and/or affordable housing impact fees currently being charged by other cities in San Diego County. KMA then reviewed market trends data, land values, development cost estimates and other industry standards for both rental and for-sale residential development, and then prepared financial models to estimate the residual land value generated by each residential project type.

The KMA report identified a range of ways the city could charge an inclusionary in-lieu fee on future residential projects, including a flat fee assessed for each unit and fees assessed by square footage, offering one at the low end of the identified range and the other at the high end, as shown in Table I below. (Note: The Village and Barrio Master Plan rates are different because the land values in that area are generally higher than elsewhere in the city.)
TABLE I: SUMMARY OF DIFFERENT IN-LIEU FEE RATES
lAssumes an annual Consumer Price Index adjustment applied to the current city in-lieu fee as set in 1996. 2 Applies to the net building area, which means the aggregate gross floor area of all the unrestricted dwelling units within a development, excluding areas outside the dwelling unit's habitable space such as garages, carports, parking areas, porches, patios, and excluding common areas such as lobbies, common hallways, stairways, elevators and equipment spaces.

The tables below provide scenarios showing different ways the city could charge an inclusionary housing in-lieu fee on future small residential projects, and how those rates could financially impact new developments. The scenarios are for discussion purposes only, the development scenarios identified assume that all unit sizes are the same, while the actual unit sizes found in new development projects typically vary, resulting in varying in-lieu rates.

March 22, 2022 Item #4 Page 3 of 181

Possible VBMP rates Possible citywide rates
Flat fee $25/sf Flat fee $25/sf $35/sf
$55,000 $31,240 $34,940 $55,000
$37,500 $31,240
$34,940 $80,000 $31,240
$77,000
$52,500
$112,000
CPI-

adjusted
rate
2,200 sf
1,500 sf
$4,515
$4,515
3,200 sf $4,515
$8,529
$8,529
$8,529
$15/sf
$33,000
$22,500
$48,000
$37,500 $34,940
$80,000
Flat fee $15/sf $25/sf
500 sf $18,060
$18,060
1,500 sf $18,060
Proposed inside VBMP rates
Flat fee $25/sf $35/sf
$34,116 $124,960 $30,000 $50,000 $139,760 $50,000 $70,000 $34,116 $124,960 $57,000 $95,000 $139,760 $95,000 $133,000 $34,116 $124,960 $90,000 $150,000 $139,760 $150,000 $210,000 950 sf
CPI-

adjusted
rate
Proposed outside VBMP rates
TABLE 2: Potential fee revenue for a single-family home on a single residential lot TABLE 3: Potential fee revenue for a four-unit apartment complex TABLE 4: Potential fee revenue for a six-unit apartment complex Current
flat fee
500 sf $27,090
950 sf $27,090
1,500 sf $27,090
Staff recommend that:
• For property owners building a single-family residence on a single lot, the in-lieu fee be adjusted from a flat fee of $4,515 to $8,529, which is the result of the annual Consumer Price Index adjustment being applied to the current rate, set in 1996. • For all other qualifying projects, those with from two to six units, charging a rate of $15 per net building area for each proposed market-rate unit, and applying this rate citywide, both inside and outside the area covered by the Village & Barrio Master Plan.

There are a few reasons why staff are making this recommendation. By its design, applying a cost per square foot approach for an in-lieu fee encourages the construction of smaller, ideally less expensive units - the smaller the units, the smaller the fee. Also, applying the fee citywide ensures consistency and ease of application, with one rate for all applicants instead of multiple rates. And while a $15 per foot rate will result in a significant increase over the current in-lieu fee, it is at the lower end of the fee scale and less likely to adversely impact housing development compared to the higher fee rates identified in the KMA study. Put another way, given the success of the inclusionary program and Housing Trust Fund, this recommendation is sensitive to the adverse financial impacts a fee increase will have on future development. Refer to the "Housing Commission recommendation" section below for discussion and recommendation on annual fee escalators.

CPI-

adjusted
rate
Possible outside VBMP rates Possible inside VBMP rates
Flat fee $25/sf $35/sf Flat fee $15/sf $2.5/sf
$51,174 $187,440 $45,000 $75,000 $209,640 $75,000 $105,000 $51,174 $187,440 $85,500 $142,500 $209,640 $142,500 $199,500 $51,174 $187,440 $135,000 $225,000 $209,640 $225,000 $315,000 March 22, 2022 Item #4 Page 4 of 181

Recommendations on amendments to inclusionary housing policies The three council policy statements that provide applicants with alternative ways of complying with the city's inclusionary housing program (nos. 57, 58, and 68) have been in place since 1995, and much has changed since then in how inclusionary housing requirements can be achieved. Staff are proposing to consolidate the policies into a single policy statement and expand upon the implementing procedures for alternative means of compliance — consistent with the city's current Inclusionary Housing Ordinance — to accommodate the unique challenges facing developers in providing affordable housing in Carlsbad.

The sections below mirror the sections in the revised policy (Attachment A to Exhibit 1) and provide an overview of the changes being proposed. Staff have also developed an informational bulletin in simple-to-understand terms to help the public better understand the city's inclusionary housing requirements (Exhibit 8).

Accessory dwelling unit instead of in-lieu fee
The current inclusionary housing ordinance allows developments proposing a total of six or fewer units to satisfy their affordable housing obligation through payment of the inclusionary housing in-lieu fee. Under the revised policy, the in-lieu fee may be waived if a detached or attached accessory dwelling unit is constructed concurrent with construction of the new home, deed restricted for low-income households for 30-years and occupied by income- qualified families. This allowance only applies to property owners who are constructing one single-family residence on a single lot.

Inclusionary affordability requirement and credit adjustment Under the inclusionary ordinance, developments proposing a total of seven or more units must provide at least 15% of the development's units as affordable to lower income households. Current Council Policy Statement No. 68 allows applicants to reduce this 15% requirement to 12.5% if certain conditions are met. (e.g., units are affordable to very low and extremely low-income households. Refer to the information bulletin provided as Exhibit 8 for an example showing how the allowance can be applied to a theoretical development project).

One of the conditions under the current policy is that it applies only to development of housing to be offered for sale. To encourage more housing development that offers lower affordability levels, staff are proposing to expand upon the policy and allow both for sale and rental developments to participate.

Also, the inclusionary ordinance uses the term "lower-income housing" when referring to the 15% inclusionary housing requirement. The proposed policy clarifies that the default affordability level of the required inclusionary housing unit is "low-income," which means affordable to households earning less than 80% of the area median income for San Diego County as determined annually by the U.S. Department of Housing and Urban Development.

The affordability is set at the 70% income level for rental households and 80% for ownership units. This helps tie the policy to the definitions provided in the current ordinance.

Lastly, a new provision to the policy is proposed that allows developers to apply any combination of income categories toward their 15% inclusionary requirement (e.g., moderate, low, very low, and/or extremely low-income), as long as the total average gross income restriction does not exceed 80% of the area median income. This offers additional flexibility in financing for developers and provides the city with affordable units of varying affordability levels, which will help achieve the housing targets in its Housing Element.

March 22, 2022 Item #4 Page 5 of 181

Use of accessory dwelling units
The current inclusionary housing ordinance allows an applicant to construct up to 15 accessory dwelling units within the project to satisfy their inclusionary requirements for the project.

However, the ordinance or the current policies do not provide implementation procedures for the use of accessory dwelling units to satisfy inclusionary requirements. The revised policy proposes these specific requirements for use of this alternative:
• The project is proposed to have 200 or more residential detached units • The ADUs are attached or detached housing
• The ADUs shall be affordable for low-income residents for at least 30 years The property owner shall be required to make sure the tenant's income qualifies and restrict rents to not exceed 70% of the area median income for San Diego County.

Combined inclusionary housing (off-site compliance)
The city's inclusionary ordinance encourages affordable inclusionary units to be constructed on-site but recognizes that circumstances may arise in which the public interest would better be served by building the units at an alternative site. Current Council Policy Statement No. 57 sets forth the criteria, in the form of questions, for when the City Council can authorize this off-site compliance alternative.

Because land use decisions are based on findings, the revised policy converts the questions into findings that must be made by the decision-making authority in order to approve the request. This is in keeping with current practices. The processing steps and worksheet that are included in the current policy have been removed because it is more appropriate to have those processing steps be part of a processing guide for the Community Development Department.

Inclusionary Housing Credit Purchase Program
The inclusionary ordinance provides that inclusionary units created which exceed the final requirement for a project may, subject to City Council approval, be utilized by a developer to satisfy inclusionary requirements of other projects. This is referred to as a combined inclusionary housing project, and in instances where the city is financially participating in the combined inclusionary housing project, the City Council can approve and designate a combined inclusionary housing project as an Affordable Housing Credit Bank project, in which the city may sell affordable housing credits to other developers who make a request to purchase affordable housing credits as an alternative way of satisfying the inclusionary housing requirement for their project.

In this manner, the city is able to recoup its financial investment in the project and then use these funds to assist additional affordable housing projects. It is important to also note that when the city financially participates in a combined inclusionary housing project the financial assistance comes in the form of a low-interest loan to the project, with the developer paying off the loan amount to the city over the life of the project. Between the sale of the credits and the repayment of the loan, the city ultimately receives funds that are twice the amount of the initial financial assistance with all of these received funds deposited into the Housing Trust Fund and then used to assist additional affordable housing projects.

March 22, 2022 Item #4 Page 6 of 181

The first project to be established as an affordable housing credit bank project was the 344- unit affordable housing project known as the Villa Loma Apartments in 1995. In keeping with Council Policy Statement No. 58, the per unit credit purchase price was set at $28,000. This fee was established by dividing the subsidy amount ($4.1 million in city funds plus a $900,000 developer contribution) by the 184 excess affordable housing units created in the project.

Those credits were then purchased by other developers to satisfy the inclusionary requirements of other residential developments in the southwest and southeast quadrants, as they are defined in the city's Growth Management Plan.

Since then, the City Council has approved affordable housing credit bank projects for three other city-assisted affordable housing projects: Cassia Heights Apartments, Roosevelt Gardens and Tavarua Senior Apartments. All three projects were 100% affordable housing projects in which the city financially participated. Collectively, affordable housing credit purchases from these four bank projects have resulted in about $8.6 million in deposits to the Housing Trust Fund during the past 20-year period. The $8.6 million deposit total is in addition to the revenue the city has received from payments made on the city loans for these four projects.

The revised policy being recommended includes language that memorializes how an affordable housing credit bank project is established, clarifies the eligibility requirements for developers wishing to purchase credits, and clearly states the formula used to establish the credit purchase price.

Specifically:
• The revised policy provides findings that the City Council must make for an Affordable Housing Credit Bank project to be established. Once the bank is approved by the City Council, the sale of the credits to other developers for their projects can be approved administratively so long as the project complies with the city's Inclusionary Housing Ordinance and the policy. Only those affordable housing units in excess of inclusionary ordinance requirements may be eligible for sale under this credit program.. In cases when the city financially participates in the development of a housing project where 100% of the units are affordable to lower income households, all of the affordable units are eligible for purchase under this credit program. • Staff are not recommending any changes to the current policy on how the credit purchase price is established. Under current policy, the purchase price for each unit, or credit, shall be determined by dividing the "local financial contribution" — that is, the city's contribution to a credit bank project by the total number of affordable units in the project that are in excess of inclusionary requirements, or in the case of an 100% affordable housing project, the total number of units in the project. The city's financial contribution is to consist of all city financial assistance provided to the project, which includes loans, expenditures, hard, and soft costs, land costs and accrued interest. The credit price shall be adjusted annually by the Consumer Price Index and set by the City Council as part of its annual approval of the city's Master Fee Schedule.

March 22, 2022 Item #4 Page 7 of 181

• The revised policy limits the types of projects that are eligible to request to buy affordable housing credits as an alternative way of satisfying the inclusionary housing requirement. Only developers proposing more than seven but no more than 50 residential units would be eligible to make a request to purchase affordable housing credits to satisfy their inclusionary housing requirements. • The revised policy also establishes the amount of credits that need to be purchased for each required inclusionary unit based on project size:
o 7 to 20 units — 1 credit
o 21 to 35 units — 1.5 credits
o 36 to 50 units — 2 credits
• The revised policy includes specific findings that the decision-making authority for the development project must make to approve the purchase and sale of a credit from an established affordable housing credit bank project. • The revised policy clarifies when payment will occur and includes a provision that applicants must purchase the affordable credits from the oldest established affordable housing credit bank project that is located within the same or adjacent city quadrant in which the market-rate units are located. This prevents applicants from "credit shopping" for less expensive housing credits from the city's credit banks • The policy also clarifies how near the location of the affordable housing credit bank must be to the proposed development project. Carlsbad Municipal Code Section

21.85.080 states that the combined project must be in the same city quadrant, or contiguous quadrant, in which the proposed market-rate units are proposed. The policy clarifies that "contiguous" includes quadrants that share a common border. For example, the northeast and southwest quadrants are considered contiguous to the northwest quadrant because they share a common border (El Camino Real and Palomar Airport Road, respectively). Therefore, a development project in the southwest quadrant will be eligible to purchase credits from an affordable housing credit bank that is in the northwest or southeast quadrant.

Other alternative means of compliance not specified
Consistent with the Inclusionary Housing Ordinance, the revised policy includes language informing applicants that the City Council may approve alternatives that are not authorized by this policy when the proposed alternative supports specific Housing Element policies and goals and helps the city meet its state housing requirements. Alternatives may include, but are not limited to, acquisition and rehabilitation of affordable units, conversion of existing market-rate units to affordable units, construction of special needs housing projects or programs (e.g., shelters or transitional housing), the construction of accessory dwelling units beyond what is allowed under the policy, an affordable housing credit bank that does not utilize city funding, or the purchase of housing credits for projects greater than 50 residential units.

March 22, 2022 Item #4 Page 8 of 181

Approval authority
The revised policy simplifies the approval process by giving the decision-making authority responsible for the approving underlying permit application(s) for a project the authority to consider and approve alternative methods to satisfy the project's inclusionary housing requirement if the methods are found to be consistent with the policy.

All projects will have conditions placed upon them requiring that an affordable housing agreement be reviewed, approved and recorded before the final map for the project is recorded or building permits are issued, whichever comes first. Affordable housing agreements that are consistent with the policy and that do not include a request for financial assistance from the city would be considered for approval by the Housing & Homeless Services Director after review and recommendation of the Affordable Housing Policy Team, which is comprised of relevant city staff, and the City Attorney's office. Agreements that deviate from the policy or that include requests for financial assistance from the city would be considered by the City Council, after review and recommendation of the Affordable Housing Policy Team and the Housing Commission.

Housing Commission recommendations
On Feb. 10, 2022, the information contained in this staff report was presented at a public meeting before the Housing Commission. The commission considered the information and public input and passed a resolution (Exhibit 10) supporting staff's recommendations with the following exceptions:

Annual adjustment to the in-lieu fee
Like many cities, Carlsbad applies an automatic annual escalator for many of its fees. While there are many different types of escalators that can be used, the city historically uses the Consumer Price Index, or CPI.2 As such, staff initially recommended that the in-lieu fee be adjusted annually using the CPI rate. The Housing Commission, however, recommended that the fee be adjusted annually based on a price index that most closely responds to housing construction inflation rather than price of goods and services.

In consultation with KMA, there are a few options to consider for a price index that fits the recommendation (Exhibit 11); however, staff recommend that the city apply the Construction Cost Index. The Construction Cost Index, known as CCI, is widely used in the construction industry to assess inflationary effects on construction materials and labor costs and the city has used the CCI to annually adjust similar fees such as planned local drainage area fees and Sewer and Water Connection Fees. For comparison, the table below shows the CPI and CCI indexes for the past five years.

Increase in-lieu fee for projects proposing two to six units Staff recommended that the in-lieu fee for projects proposing two to six units be charged at a rate of $15 per net building square foot. The Housing Commission recommended that the rate be increased to $20 per net square foot, phased over a five-year period, and then adjust annually based on a price 2 The CPI is a standard used to track changes in the prices of goods and services purchased by households.

March 22, 2022 Item #4 Page 9 of 181

Staffl
Housing Commission $16.00 $17.00 $18.00 $19.00 $20.00
index. The commission found that the rate was slightly more than staff recommendation, but still at the lower end of the fee range identified in the KMA report. Staff, however, continue to recommend the $15 rate for the reasons previously discussed; particularly, the significant increase a $15 rate will have on new development given the current high price of home sales in Carlsbad. Additionally, by applying an annual CCI adjustment to the $15 rate, staff's recommended rate is roughly 17% lower than the rate recommended by the Housing Commission as reflected in the chart below.

Year 1 Year 2 Year 3 Year 4 Year 5
' Assumes static annual CCI rate of 2.7%, as reflected in Table 2 of Exhibit 11.

Amend the Inclusionary Housing Ordinance
The Housing Commission also recommended that the City Council evaluate the feasibility of increasing the number of units eligible to participate in payment of the in-lieu fee from six units to 20 units and consider changing the housing credit purchase price to a flat rate based on the affordability gap per affordable unit rate as determined by KMA, which is $177,000. The commission found that a flat rate that is applied to all credit purchases ensures consistency in its application and the higher rate was consistent with the affordability gap. However, city staff do not support this recommendation for the following reasons:
• A contributing factor in having 13% of the city's housing stock over the past 25 years as affordable to lower income families is due to the longstanding requirement that inclusionary housing units be built concurrent with the construction of the market-rate units. Six units was specifically identified under the code as the cut off because 15% of six units results in a less than one fractional unit requirement, compared to 15% of 7 or more units which results in a requirement of at least one unit or greater. By expanding the in-lieu fee option from six to 20 units, the number of affordable units built — and the city's 13% overall affordability rate — will decrease significantly because developers, if given the option, will opt to pay a fee instead of building an affordable unit.
• The housing credit purchase price was never intended to represent or act as an in-lieu fee that attempts to capture the gap in construction costs between a market-rate and affordable unit As discussed earlier in this report, the city's financial contribution in a combined inclusionary housing project is in the form of a loan that the developer repays with interest --- credit payments are considered an additional funding source derived from the same combined inclusionary housing project. Another way to look at this, under the current program design, the city gets paid twice for its financial contribution to the same affordable housing development project, with all of the proceeds being deposited into the Housing Trust Fund. The Housing Trust Funds are then available to assist additional affordable housing projects and are used to leverage additional state and federal dollars, usually at a minimum of a 1:9 ratio, such that the city is generally never financially contributing more than 10% of the overall project costs. • Increasing the cost of a credit to $177,000 may actually result in a reduction in potential revenues to the Housing Trust Fund. If developers of medium-sized projects choose to build the required affordable units, rather than purchase credits, the result would be a reduction in March 22, 2022 Item #4 Page 10 of 181

the opportunity to leverage Housing Trust Fund dollars at a minimum 1:9 ratio, thereby reducing the resultant number of additional affordable housing units that are able to be provided through the leveraging of Housing Trust Fund dollars.

Options
Staff offer the following options for the City Council's consideration. Because of the nature of this item, the City Council may choose one or more of these options or an option not specifically listed.

Option 1: Adjusting the inclusionary housing fee
Staff recommend adjusting the inclusionary housing in-lieu fee for property owners building a single- family residence on a single lot from $4,515 per unit to a new flat fee of $8,529, an amount based on the current Consumer Price Index. For all other qualifying projects, those with two to six units, staff recommend changing the flat fee to a rate of $15 per net building area for each proposed market- rate unit, and applying this rate citywide, both inside and outside the area covered by the Village & Barrio Master Plan.

Benefits
• The proposed single-family rate, while a 100% increase over the current rate, does not place a unreasonable burden on families wishing to build their home in Carlsbad, and reflects what the rate would be if a CPI had been adopted back in 1996 and applied to the in-lieu fee rate • The proposed per square foot fee better reflects the current construction cost gap between market-rate and affordable housing
• Creates citywide consistency, rather than two sets of rates for different areas of the city • Would increase revenue to the Housing Trust fund, supporting the development of additional affordable housing in Carlsbad
• In keeping with City Council direction
Drawbacks
• Although the recommendation is at the low end of the recommended range, and can be supported via the gap analysis, this increase would still increase costs for developers which will likely be passed on to the purchase price of the new units.

Option 2: Consolidating related council policy statements Staff and the Housing Commission recommend consolidating and revising the three Council Policy Statements detailed (nos. 57, 58, and 68) into a single policy statement (No. 57).

Benefits
• Expanding the implementing procedures for alternative means of compliance with the inclusionary housing requirements would give developers more options in providing affordable housing in Carlsbad
• Clarifies confusing wording in the current policies and helps streamline permit applicant process
• Better reflects the city's longstanding processing practices relating to inclusionary housing Drawbacks
• None identified by staff
March 22, 2022 Item #4 Page 11 of 181

Option 3: Adjusting the inclusionary housing fee to a higher rate per square foot The Housing Commission favored a slightly different option, recommending that the rate be increased to $20 per net square foot, phased in over a five-year period atwitch time the fee would be adjusted annually based on the Engineering News-Record (ENR) — Construction Cost Index (CCI) 20 City Average.

Benefits
• The commissioners felt this higher rate was justified, and noted it was less than the highest rate identified in the KMA report
• The higher rate may generate additional Housing Trust Fund revenues that can be applied towards other affordable housing projects.

Drawbacks
• This higher rate could adversely impact the financial feasibility of new development in today's costly real estate market and/or significantly increase the sales price of new housing.

Option 4: Annual inclusionary fee adjustments
The Housing Commission also recommended that the fee be adjusted annually based on a price index that most closely responds to housing construction inflation, such as the ENR-CCI index, rather than the price of goods and services. (City staff support this recommendation) Benefits
• The Housing Commission felt that adjusting the rate based on housing construction inflation, instead of inflation of goods and services better reflects changes in the cost of developing residential projects.
• The CPI and ENR-CCI rates do not differ significantly.

Drawbacks
• None identified by staff
Option 5: Amending the Inclusionary Housing Ordinance to increase the in-lieu fee threshold The Housing Commission recommended the city amend the inclusionary housing ordinance to allow projects with as many as 20 units the ability to choose to pay the in-lieu fee, instead of limiting the in- lieu fee payment option to projects of six or fewer units. (City staff do not support this recommendation)
Benefits
• The increased unit count more closely aligns with the threshold used by other cities in their inclusionary regulations.
• Provides developers with an alternative to constructing the inclusionary units, which may increase housing production.

Drawbacks
• Deviates from the initial intent of the inclusionary housing regulations, which is to have the inclusionary units constructed concurrent with construction of the market-rate units. • If given the option, applicants will pay the lower in-lieu fee rather than pay the inclusionary housing credit or build the inclusionary unit, which will result in an overall reduction in March 22, 2022 Item #4 Page 12 of 181

revenues to the Housing Trust Fund and therefore a reduction in the opportunity to leverage Housing Trust Fund dollars against additional state and federal dollars. • Will result in a reduction in the production of affordable housing units since it will take time to collect sufficient in-lieu fees to assist in the development of new affordable housing units. • Would require an amendment to the city's municipal code, including review and approval by the California Coastal Commission.

Option 6: Amending the ordinance to revise how the affordable housing credit purchase price is calculated
The Housing Commission also recommended the city change the housing credit purchase price to a flat rate based on the affordability gap per affordable unit rate as determined by KMA, which would be $177,000. (City staff do not support this recommendation) Benefits
• The increased rate reflects the actual gap between the construction cost to build a market- rate unit and an affordable unit.
• The current credit fee varies between affordable housing credit banks. A flat rate ensures consistency and predictability for staff and developers.

Drawbacks
• The housing credit purchase price was never intended to represent or act as an in-lieu fee that attempts to capture the gap in construction costs between a market-rate and affordable unit.
• The city's financial contribution in a combined inclusionary housing project is in the form of a loan that the developer repays with interest --- credit payments are considered an additional funding source derived from the same combined inclusionary housing project.

Therefore, the city gets paid twice for its financial contribution to the same affordable housing development project. Increasing the cost of a credit to $177,000 may actually result in a reduction in potential revenues to the Housing Trust Fund. If developers of medium-sized projects choose to build the required affordable units, rather than purchase credits, the result would be a reduction in the opportunity to leverage Housing Trust Fund dollars against additional state and federal dollars, usually at a minimum of a 1:9 ratio. • The $177,000 affordability gap must be reviewed and adjusted over time, as opposed Staff's overall recommendation
Staff recommend options 1 and 2.

Fiscal Analysis
The following estimated financial impacts are based on assumptions derived from analyzing development projects that paid the city's in-lieu fee in 2017 through 2021. Refer to Exhibit 12 for additional detail and assumptions.
• For single-family homes where the in-lieu fee will be increased from $4,515 to $8,529, staff estimate an increase of $12,900 in annual in-lieu fee revenues over current levels (an estimated 16 total homes per year).

March 22, 2022 Item #4 Page 13 of 181

• For development projects that propose two to six units, where the in-lieu fee is increased from $4,515 per unit to $15 per square foot, staff estimate an increase of $264,000 in annual in-lieu fee revenues over current levels (an estimated 47 total units per year). • For development projects that propose two to six units, where the in-lieu fee is increased from $4,515 per unit to $20 per square foot, staff estimate an increase of $366,000 in annual in-lieu fee revenues over current levels (an estimated 47 total units per year).

Next Steps
The changes to the fee and policy go into effect immediately following City Council approval. Staff will update the appropriate tracking systems and websites and inform the industry of the changes. Should the City Council direct staff to pursue the Housing Commission recommendations, the change to increase the in-lieu fee eligibility from six to 20 units would require an amendment to Chapter 21.85 and to the city's Local Coastal Program, which requires approval from the California Coastal Commission. Staff anticipate that the code amendment will take 12 to 18 months to be brought back to the City Council for its consideration. Following City Council action, staff anticipate it will take an additional 12 months to process the Local Coastal Program amendment with the Coastal Commission.

Environmental Evaluation
The proposed action is covered by the general rule under California Environmental Quality Act Guidelines 15061(b)(3), in that the activity is covered by the common sense exemption that CEQA applies only to projects that have the potential for causing a significant effect on the environment.

The proposed action seeks to combine three longstanding council policy statements (No. 57, No. 58 and No. 68) that were developed in an effort to help implement the city's Inclusionary Housing Program into a single revised Council Policy Statement (No. 57). The revised policy language does not significantly alter the intent or purpose of the current policies, but streamlines application, clarifies inconsistent and conflicting language, and memorializes longstanding processing practices.

The adjustments in the inclusionary housing in-lieu fee amounts being considered are based on an economic analysis prepared by Keyser Marston Associates Inc. dated April 2021 specifically for the City of Carlsbad that evaluated area specific market trends data, land values, development cost estimates and other industry standards for both rental and for-sale residential development and then prepared pro forma financial models to estimate the residual land value generated by each residential prototype in determining options for different in-lieu fee amounts. Given the scope of the proposed action, it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, and therefore is found not to be subject to CEQA.

Public Notification
This item was noticed in keeping with the Ralph M. Brown Act and it was available for public viewing and review at least 72 hours before the scheduled meeting date.

Exhibits

1. City Council resolution

2. City Council resolution

3. Aug. 20, 2019, City Council motion

4. Dec. 17, 2019, City Council motion

5. Council Policy Statement No. 57

March 22, 2022 Item #4 Page 14 of 181

6. Council Policy Statement No. 58

7. Council Policy Statement No. 68

8. Keyser Marston Associates' Inclusionary Housing In-Lieu Fee Update Report

9. Informational Bulletin — Inclusionary housing program

10. Housing Commission resolution

11. Price index options

12. Estimated In-Lieu Fee Amounts
March 22, 2022 Item #4 Page 15 of 181

RESOLUTION NO. 2022-077

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,

CALIFORNIA, AMENDING THE CITY'S INCLUSIONARY HOUSING IN-LIEU FEE (MCA2022-0002/PUB2022-0004)
Exhibit 1
WHEREAS, it is in the best interest of the public to establish reasonable standards relating to the provision of affordable housing for all income levels; and WHEREAS, the city's lnclusionary Housing Ordinance (Section 21.85) was established in April 1993 and requires that all residential developments greater than six units restrict 15 percent of the total number of homes in a project as affordable to low-income households; and WHEREAS, while this obligation is fulfilled through construction of a variety of rental or ownership units, residential developments less than seven units may satisfy their inclusionary housing obligation through payment of an inclusionary housing in-lieu fee; and WHEREAS, Goal 10-G.2 of the city's 2021-2029 Housing Element directs the city to provide sufficient new, affordable housing opportunities in all quadrants of the city to meet the needs of current lower- and moderate-income households and those with special needs, and a fair share proportion of future lower- and moderate-income households; and WHEREAS, Objective "a" of Program 2.1 in the city's 2021-2029 Housing Element states that the city shall complete a Gap Analysis of the city's inclusionary housing in-lieu fee to determine a fee amount necessary and appropriate to reflect market conditions and ensure fees collected are adequate to facilitate the development of affordable units.

WHEREAS, Objective "b" of Program 2.1 in the city's 2021-2029 Housing Element directs the city to amend its inclusionary housing program to reflect the updated in-lieu fee and revise the program as necessary to maximize production of affordable units without adversely affecting market-rate development.

WHEREAS, Keyser Marston Associates, Inc. (KMA), a real estate economics advisory consulting firm who was selected by the city via a competitive bidding process, prepared a report dated April 2021 entitled the lnclusionary Housing In-Lieu Fee Update for the City of Carlsbad, which provided options for an in-lieu fee based on an updated Gap Analysis of the Carlsbad housing market; and March 22, 2022 Item #4 Page 16 of 181
WHEREAS, in a staff report dated Feb. 10, 2022, staff recommended that the Housing Commission approve the consolidation of Council Policy Statement Nos. 57, 58, and 68 into a single, amended Council Policy Statement and recommended adjustments to the inclusionary in-lieu fee as follows:

1. For a new single-family dwelling on a single-family lot, increase the in-lieu fee from $4,515 to $8,529, adjusted annually based on the Consumer Price Index (CPI); and,

2. For all other qualifying residential development projects, change the in-lieu fee methodology from $4,515 per market-rate unit to $15 per square foot of net building area for each market-rate unit.

WHEREAS, at their publicly noticed Feb. 10, 2022 meeting, the Housing Commission considered the KMA report, public comment, and testimony of staff and a representative from KMA and recommended the following inclusionary housing in-lieu fee adjustments:

1. For a new single-family dwelling on a single-family lot, increase the in-lieu fee from $4,515 to $8,529, adjusted annually based on a price index that most closely responds to housing construction inflation; and,

2. For all other qualifying residential development projects, change the in-lieu fee methodology from $4,515 per market-rate unit to $20 per square foot of net building area for each market-rate unit, adjusted annually based on a price index that most closely responds to housing construction inflation.

WHEREAS, the city distributed a notice of intended decision to adopt the "Common Sense" exemption, covered by the general rule under State CEQA Guidelines 15061(b)(3). The notice was circulated for a 10-day period, which began on Feb. 15, 2022 and ended on Feb. 25, 2022. The city did not receive any comment letters on the CEQA findings and determination. The effective date and order of the city planner CEQA determination was Feb. 28, 2022; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:

1. That the above recitations are true and correct.

March 22, 2022 Item #4 Page 17 of 181

2. That the inclusionary housing in-lieu fee for a new single-family dwelling on a single-family lot changes from $4,515 to $8,529, adjusted annually based on the Engineering News­ Record - Construction Cost Index; and,

3. That the inclusionary housing in-lieu fee for residential development projects proposing two to six units change from $4,515 per market-rate unit to $15 per square foot of net building area for each market-rate unit, adjusted annually based on the Engineering News-Record­ Construction Cost Index.

4. That the above fee adjustments become. effective April 1, 2022. Discretionary permit applications deemed complete prior to that date or building permit applications submitted where the associated discretionary permit application was approved prior to that date, are not subject to the new higher in-lieu fee rate.

5. That the inclusionary housing in-lieu fee be reassessed within ten years.

PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 22nd day of March, 2022, by the following vote, to wit:

AYES:

NAYS:

ABSENT:

Hall, Blackburn, Bhat-Patel, Acosta, Norby.

None.

None.
�V' FAVIOLA MEDINA, City Clerk Services Manager
(SEAL)
March 22, 2022 Item #4 Page 18 of 181
RESOLUTION NO. 2022-078

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,

CALIFORNIA, CONSOLIDATING AND AMENDING COUNCIL POLICY
STATEMENTS NOS. 57, 58 AND 68 INTO A SINGLE POLICY DOCUMENT, NO. 57, TO HELP STREAMLINE PERMIT APPLICATIONS, CLARIFY CONFUSING

LANGUAGE, AND MEMORIALIZE LONGSTANDING PROCESSING PRACTICES RELATING TO INCLUSIONARY HOUSING COMPLIANCE (MCA2022-
0002/PUB2022-0004)
Exhibit 2
WHEREAS, it is in the best interest of the public to establish reasonable standards relating to the provision of affordable housing for all income levels; and WHEREAS, the city's lnclusionary Housing Ordinance (Carlsbad Municipal Code Section 21.85) was established in April 1993 and requires that all residential developments greater than six units restrict 15 percent of the total number of homes in a project as affordable to low-income households, and that residential developments less than seven units may satisfy their inclusionary housing obligation through payment of inclusionary housing in-lieu fees; and WHEREAS, Goal 10-G.2 of the city's 2021-2029 Housing Element directs the city to provide sufficient new, affordable housing opportunities in all quadrants of the city to meet the needs of current lower- and moderate-income households and those with special needs, and a fair share proportion of future lower- and moderate-income households; and WHEREAS, Objective "b" of Program 2.1 in the city's 2021-2029 Housing Element states that the city shall update and amend its inclusionary housing program as necessary to maximize production of affordable units without adversely affecting market-rate development; and WHEREAS, consistent with Carlsbad Municipal Code Section 21.85.070.A, the City Council adopted Council Policy Statement Nos. 57 (Aug. 8, 1995), 58 (Sept. 12, 1995), and 68 (Oct. 19, 2004) as acceptable alternatives to the construction of new inclusionary housing units; and WHEREAS, the city desires to update these policies in a manner consistent with state housing law and Objective "b" to Program 2.1 of the city's 2021-2029 Housing Element in order to streamline application, clarify confusing language, and memorialize longstanding processing practices relative to inclusionary housing compliance; and
March 22, 2022 Item #4 Page 19 of 181
WHEREAS, at their publicly noticed Feb. 10, 2022 meeting, the Housing Commission considered and recommended the approval of a consolidated and updated inclusionary housing policy addressing alternative means of compliance on as shown in Attachment A to this resolution; and WHEREAS, the city distributed a notice of intended decision to adopt the "Common Sense" exemption, covered by the general rule under State CEQA Guidelines 15061(b)(3). The notice was circulated for a 10-day period, which began on Feb. 15, 2022 and ended on Feb. 25, 2022. The city did not receive any comment letters on the CEQA findings and determination. The effective date and order of the city planner CEQA determination was Feb. 28, 2022; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows:

1. That the above recitations are true and correct.

2. That Council Policy Statement Nos. 57, 58, and 68 are hereby rescinded.

3. That the City Council hereby approves revised Council Policy Statement No. 57, attached hereto as Attachment A.

PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 22nd day of March, 2022, by the following vote, to wit:

AYES:

NAYS:

ABSENT:

Hall, Blackburn, Bhat-Patel, Acosta, Norby.

None.

None.
,¥ FAVIOLA MEDINA, City Clerk Services Manager
(SEAL)
March 22, 2022 Item #4 Page 20 of 181
City Council

POLICY STATEMENT
Policy No.

Date Issued
57 3-22-22
Resolution No. 2022-078
Subject: lnclusionary Housing Ordinance - Alternative Means of Compliance Purpose
Carlsbad Municipal Code (CMC) §21.85.100, of the city's lnclusionary Housing Ordinance, sets forth the City Council's abi·lity to make available certain allowances and provisions for development applications that would result in meeting the city's affordable housing needs. To assist in achieving this end, the City Council developed this policy to provide alternatives means of compliance for meeting the city's growing affordable housing needs. The provisions contained in Policy No. 57 (Off-site and Combined lnclusionary Housing Projects), Policy No. 58 (Sale of Affordable Housing Credits), and Policy No. 68 (lnclusionary Housing Incentive Credit Schedule) have been combined into this revis_ed Policy No. 57. Policy Nos. 58 and 68 were then subsequently rescinded to have a single City Council Policy that administers the iriclusionary housing program.

Background
The city's lnclusionary Housing Ordinance (CMC §21.85) was passed by the City Council in April 1993 and established the legal basis for requiring inclusionary housing in new residential development in the city. Under the program, all residential developments are required to . comply with the code, projects with seven or more units are required to restrict 15 percent of the total number of homes as affordable to lower income households. This obligation is fulfilled through construction of rental or ownership units, or through other alternative means of compliance.

Statement of policy
It is the policy of the City Council that the following Alternative Means of Compliance satisfy the intent and requirements of CMC §21.85, 2021-2029 Housing Element Goals 10-G.2 and 10-G.4, and Housing Element Policies 10-P.13 and 10-P.35.

1. In-Lieu Fee
Pursuant to CMC §21.85.110, developments proposing a total of six or fewer units may satisfy their affordable housing obligation through payment of inclusionary housing in-lieu fees. As an alternative for property owners who are constructing one single-family residence on a single lot, an Accessory Dwelling Unit (detached or attached) or Junior Accessory Dwelling Unit may be constructed concurrent with construction of the market­ rate unit. The ADU or JADU must be deed restricted for occupancy by income and rent qualified low-income households for 30-years.

2. lnclusionary Affordability Requirement and Credit Adjustment Attachment A
March 22, 2022 Item #4 Page 21 of 181
City Council Policy Statement
March 22, 2022

CMC §21.85.030.B states that not less than 15% of the total units in a residential development of seven or more units shall be restricted to "lower-income households." Household income qualification is defined as 80% or below of the area median income for San Diego County. The affordability is set at the 70% income level for rental households and 80% for ownership units. To assist the city in providing housing at varying affordability levels (e.g., moderate, low-, very- and extremely low-income), developers shall have the following options for satisfying the inclusionary ordinance:
a. At least 15% of the total units are restricted for low-income households (default requirement as defined in CMC §21.85.020); or,
b. At least 15% of the total units are restricted at any combination of income categories (e.g., moderate, low, very low, and/or extremely low-income) as long as the total average gross income restriction does not exceed 80% of the area median income for San Diego County as determined annually by the U.S. Department of Housing and Urban Development (affordable housing levels are defined in CMC §21.85.020); or,
c. A residential development can receive an incentive credit of 1.2 per inclusionary unit, thereby reducing the inclusionary housing requirement from 15% to 12.5% 1, under the following conditions.

1. All affordable units must be made available to very low or extremely low­ income households, or combination thereof.

2. The units are located on the same site as the market-rate units.

3. No financial assistance from the city is required.

3. Use of Accessory Dwelling Units
Pursuant to CMC §21.85.070.B, an applicant may construct up to 15 accessory dwelling units (ADU) to satisfy their inclusionary requirements. The standards below provide additional specifications for when this allowance can be used. a. The project proposes 200 or more residential detached units; and, b. The ADUs are an attached or detached housing product type; and, c. The ADU shall have an affordability term (low-income) of at least 30 years; and, 1 Example. An applicant proposes a 78-unit residential development, which requires that 15% of the units be reserved for low­ income (12 inclusionary units). If the above standards are applied, the inclusionary units can be adjusted by 1.2, thereby reducing the total number of affordable units from 12 to 10 (12 divided by 1.2 equals 10). Under this scenario, 10 units in a 78- unit development projects equates to 12.8%, which meets the minimum inclusionary housing requirement of 12.5%.

March 22, 2022 Item #4 Page 22 of 181
City Council Policy Statement
March 22, 2022

d. The property owner shall be required to income qualify the tenant under 80% of the area median income for San Diego County and restrict rents to not exceed the affordable rent for 70% of the area median income for the unit size.

Refer to Section 1 of this policy on the use of an ADU to satisfy inclusionary requirements on a single lot to be developed with one single-family residence.

4. Combined lnclusionary Housing (Off-Site Compliance)
Circumstances may arise in which the public interest would be better served by allowing some or all inclusionary units associated with a proposed residential development project to be produced and operated at an alternate off-site(s) location. This alternative is described as a "Combined lnclusionary Housing Project" or "Combined Project." a. lnclusionary Housing Calculation
The inclusionary housing calculation requirement shall be based on 15% of the total number of market-rate units to be provided on-site and the inclusionary/affordable units to be provided off-site.2
b. Required Findings
Consistent with CMC §21.85.080.B, the City Council delegates approval authority of any proposed Combined Projects to the decision-making authority of the proposed development project so long as the findings below are met. Notwithstanding, the City Council shall retain final approval authority of the Affordable Housing Agreement on any Combined Project that requires financial assistance from the city.

The findings below shall be included as part of the Affordable Housing Agreement decision documents.

1. The site has not or will not receive a density increase or density bonus to increase the number of total residential units permitted on the master development site.

2. Site conditions make it physically infeasible to accommodate the inclusionary units on-site.

3. Significant price and product type disparities make it financially infeasible to accommodate the inclusionary units on-site.
2 Example: An applicant proposes to satisfy its inclusionary requirements for a 112-unit project by building 15% of the total units for low-income households off-site. If the 112 units are to remain as the total market-rate units on the site, the total number of residential units needs to be recalculated before calculating the required number of inclusionary units to be provided off-site. If 85% of the total units for market rate are now 112 units then the "total residential unit count" is recalculated and becomes 132 units (112 + 0.85 = 131.8, rounded up to 132). Using the new total residential unit count of 132 units the total number of inclusionary units required for this project becomes 20 units (132 X 0.15 = 19.8, rounded to 20), which results in an off-site inclusionary housing compliance requirement of 17.9% for this project (20 + 112 = 17.85%).

March 22, 2022 Item #4 Page 23 of 181
City Council Policy Statement
March 22, 2022
Page4

4. There is a documented lack of development capacity to deliver affordable housing on-site.

5. The off-site option provides greater financial feasibility and cost effectiveness _ than the on-site alternative.

6. The off-site option provides better access to jobs, schools, transit, and services.

7. The off-site option supports affordable housing goals and policies as expressed in the city's Housing Element.

5. lnclusionary Housing Credit Purchase Program
In certain circumstances, it may be in the city's best interest to financially invest in projects or ventures that further increase the availability and overall number of affordable housing units in the city. Pursuant to §21.85.090, inclusionary units created which exceed the final requirement for a project may, subject to City Council approval in the affordable housing agreement, be utilized by a developer to satisfy other inclusionary requirements for which it is obligated or market the units to other developers as a combined project subject to the requirements of Section 21.85.080.
a. Affordable Housing Credit Bank- Establishment

1. Bank Establishment
Consistent with §21.85.090, this policy authorizes the establishment of an affordable housing credit bank where affordable units that are constructed in excess of inclusionary requirements can be purchased from the city by qualifying developers to satisfy their respective .inclusionary housing requirements. The City Council shall approve the creation of an affordable housing credit bank, subject to the following findings. i. The affordable units intended for purchase are in excess of the minimum number of units required under the city's lnclusionary Housing Ordinance; or
ii. The affordable units intended for purchase are part of a 100% affordable housing project; and
iii. The affordable excess units are const ructed and received final inspection; and
iv. The city financially contributed to the construction of the affordable housing project that the affordable excess units are a part.

This policy does not authorize a developer to sell excess affordable units that March 22, 2022 Item #4 Page 24 of 181
City Council Policy Statement
March 22, 2022

are constructed without city financial assistance. However, developers may pursue approval for such an action, consistent with CMC §21.85.090 and Section 6 of this policy.

2. Credit Pricing
The price for each unit (credit) shall be determined by dividing the "local financial contribution" by the total number of affordable units that are in excess of inclusionary requirements. The local (city's) financial contribution shall consist of all city financial assistance. provided to the project (e.g., loans, expenditures, hard/soft costs, and accrued interest). The credit price shall be adjusted annually by the Consumer Price Index (CPI) and set by the City Council as part of their annual approval of the Master Fee Schedule. b. Affordable Housing Credit Bank-Administration

1. Project Eligibility
Projects proposing more than seven, but no more than 50 residential units are eligible to purchase affordable housing credits to satisfy their inclusionary housing requirements. Projects greater than SO residential uni.ts may pursue approval of eligibility to purchase affordable housing credits consistent with CMC §21.85.070 and Section 6 of this policy.

2. Credit Purchase Ratio
The amount of credits to be purchased shall be based on the following scale.
i. 7 to 20 units - 1.0 credit for each required inclusionary unit ii. 21 to 35 units - 1.5 credits for each required inclusionary unit iii. 36 to 50 units -2.0 credits for each required inclusionary unit

3. Credit Purchase Findings
Authority to approve a credit purchase from an established affordable housing credit bank shall be given to the decision-making authority of the proposed development permit, so long as the findings below are met. Should a request to purchase credits occur after discretionary approval, the Community Development Director and the Housing & Homeless Services Director shall have the authority to approve credits, subject to the findings below. If the findings can be made, the Community Development Director, or designee shall determine via a substantial compliance determination that the credit purchase satisfies the project condition to construct the inclusionary unit, without the need to process an amendment to the permit.

March 22, 2022 Item #4 Page 25 of 181
City Council Policy Statement
March 22, 2022

i. The affordable housing credit bank project site is located in the same city quadrant in which the market-rate units are located, or is contiguous to the quadrant in which the market-rate units are proposed; and,
ii. There are sufficient housing credits available to purchase.

4. Proximity to Bank
CMC §21.85.080 states that the credit purchase must be from an affordable housing credit bank that is within the same city quadrant, or contiguous quadrant in which the proposed market-rate units are proposed. This policy shall clarify that "contiguous" includes quadrants that share a common border (e.g., the northeast and southwest quadrants are considered contiguous to the northwest quadrant because they share a common border).

5. Credit Payment
Considering how credit pricing is established (Section S.a.2), it is anticipated that the credit purchase price will vary. As such, applicants must pay the credit price of available credits from the oldest affordable housing credit bank project that is located within the same city quadrant in which the market-rate units are located, or is contiguous to the quadrant in which the market-rate units are proposed. Funds from housing credit deposits/purchases shall be deposited to the Housing Trust Fund.
i. Payment of housing credit purchases shall be due prior to recordation of the final map or issuance of a building permit, in situations where the project does not include a subdivision.
ii. Payments shall be deposited to the Housing Trust Fund pursuant to Council Policy No. 90.
iii. If the project entitlements or above-mentioned due dates expire, the credits will be made available to another project{s), subject to this process.

6. Other Alternative Means of Compliance not Specified
The City Council may approve, pursuant to CMC §21.85.070, alternatives that are not authorized by this policy where the proposed alternative supports specific housing element policies and goals and assists the city in meeting its state housing· requirements.

Alternatives may include, but are not limited to, acquisition and rehabilitation of affordable units, conversion of existing market-rate units to affordable units, construction of special needs housing projects or programs {e.g., shelters, transitional housing), the March 22, 2022 Item #4 Page 26 of 181
City Council Policy Statement
March 22, 2022

construction of accessory dwelling units, or the purchase of housing credits for projects greater than 50 residential units.

7. Approval Authority
Approval authority for development projects subject to this policy is as follows:
a. The decision-making authority for the underlying permit application(s) shall have the authority to consider and approve projects found consistent with this policy; this includes consideration and approval of the findings for Combined lnclusionary Housing Projects (Section 5.b.3).
b. Development projects that propose an alternative means of compliance that is not consistent with this policy shall be considered by the City Council, after review and recommendation of the Affordable Housing Policy Team and the Housing Commission.
c. A project condition shall be added to all projects subject to this policy requiring that an Affordable Housing Agreement, consistent with §21.85.140, be reviewed, approved, and recorded prior to Final Map or issuance of building permits, whichever comes first. Approval authority of the Affordable Housing Agreement is as follows:

1. Affordable Housing Agreements that are consistent with §21.85 and this policy and do not request financial assistance from the city shall be considered for approval by the Housing and Homeless Services Director, after review and recommendation of the Affordable Housing Policy Team.

2. Affordable Housing Agreements that propose a deviation(s) to this policy or include a request for financial assistance shall be considered by the City Council, after review and recommendation of the Affordable Housing Policy Team and the Housing Commission.

Related Policy
a. Policy No. 90
March 22, 2022 Item #4 Page 27 of 181
EXHIBIT 3

CITY COUNCIL
Minutes August 20, 2019 5 p.m.

Council Chamber
1200 Carlsbad Village Drive
Carlsbad, CA 92008
CALL TO ORDER: 5:00 p.m.

ROLL CALL: Blackburn, Bhat-Patel, Schumacher, Hamilton.

Absent: Hall.

ANNOUNCEMENT OF CONCURRENT MEETINGS: None.

PLEDGE OF ALLEGIANCE: Mayor Pro Tern Bhat-Patel led the Pledge of Allegiance.

INVOCATION: None.

APPROVAL OF MINUTES:

Minutes of the Regular Meeting held June 25, 2019.

Minutes of the Special Meeting held July 9, 2019.

Minutes of the Regular Meeting held July 9, 2019.

Minutes of the Regular Meeting held July 16, 2019.

Minutes of the Special Meeting held July 23, 2019.

Minutes of the Regular Meeting held July 23, 2019.

Motion by Council Member Blackburn, seconded by Council Member Schumacher, to approve the minutes as presented. Motion carried, 4/0/1 (Hall —Absent).

PRESENTATIONS: None.

CONSENT CALENDAR:

Item No. 2 was pulled for discussion by a member of the public.

Motion by Council Member Blackburn, seconded by Council Member Schumacher, to approve Consent Calendar Item Nos. 1 and 3 through 7. Motion carried, 4/0/1 (Hall — Absent).

1. REPORT ON CITY INVESTMENTS — Acceptance of report on City Investments as of June 30, 2019. (Staff contact: Craig Lindholm, City Treasurer; Laura Rocha, Administrative Services)

2. AWARD OF CONTRACT FOR TRANSPORTATION DEMAND MANAGEMENT SERVICES — Adoption of a Resolution approving a Professional Services Agreement with UrbanTrans North America to provide Professional Transportation Demand Management Consulting Services in an amount not to exceed $199,000 annually for a term of two years. (Staff contact:

Claudia Huerta, Community & Economic Development)
March 22, 2022 Item #4 Page 28 of 181

August 20, 2019 Carlsbad City Council Regular Meeting Page 7 for short-term vacation rentals. He also explained the differences, level of review, and past streamlining efforts for projects in the Village and Barrio areas.

In response to an inquiry by Council Member Hamilton, City Planner Don Neu explained that while a timeline target may be feasible, delays may occur due to certain items like architectural design standards. He also shared staff would need further direction from Council on what else they want to modify in the plan. Mr. Neu also shared an option on how to process the amendments.

City Attorney Celia Brewer titled and introduced the Ordinance.

Motion by Council Member Blackburn, seconded by Council Member Schumacher, to introduce Ordinance No. CS-357 acknowledging receipt of the California Coastal Commission's Resolution of Certification including suggested modifications for LCPA 14-01, and approving the associated suggested modifications to the Village and Barrio Master Plan and Local Coastal Program. Motion carried, 4/0/1 (Hall Absent).

Minute Motion by Council Member Hamilton, seconded by Council Member Schumacher, to direct staff to bring back for Council consideration in two months, a workplan that includes a timeline to address the following amendment package for the Village and Barrio Master Plan; 1) Decision making authority for the entire Village and Barrio Master Plan to City Council; 2) Permitted uses vital to a live, work, play community; 3) Parking-in-lieu fees to be directed to a specific area for parking and the potential for public/private partnerships for a specific zoned parking structure; 4) Traffic impact analysis and mitigation fees specific to the Village and Barrio Master Plan area and roadway conditions outside of the Coastal Zone; 5) Objective architectural, historical and design standards within the Village and Barrio Master Plan area; 6) Solutions and options to avoid housing-in-lieu payments in the Village and Barrio area; 7) Village and Barrio specific inclusionary policy; nd to allow for general conversation regarding additional components of the plan. Motion carried, 4/0/1 (Hall — Absent).

Mayor Pro Tern Bhat Patel announced that Item No. 10 will be continued to the City Council meeting on August 27, 2019.

10. PURE PROJECT BREWERY AND TASTING ROOM —Adoption of a Resolution approving a Minor Site Development Plan and Conditional Use Permit for a 2,206-square-foot brewery and tasting room located at 2825 State Street in the Village Center District of the Village and Barrio Master Plan and within Local Facilities Management Zone 1; and, Adoption of a Resolution approving a Parking In-Lieu Fee Program Participation Agreement between the City of Carlsbad and Russell Satterly, Susan Satterly and Undo Mino, property owners, for the project known as Pure Project Brewery and Tasting Room located at 2825 State Street in the Village Center District of the Village and Barrio Master Plan and within Local Facilities Management Zone 1. Case Name: Pure Project Brewery and Tasting Room.

Case No.: SDP 2019-0002/CUP 2018-0021 (DEV2018-0196). (Staff contact: Shannon Harker, Community & Economic Development)
March 22, 2022 Item #4 Page 29 of 181

EXHIBIT 4

CITY COUNCIL
Minutes
Dec. 17, 2019 6 p.m.

Council Chamber
1200 Carlsbad Village Drive
Carlsbad, CA 92008
CALL TO ORDER: 6:00 p.m.

ROLL CALL: Hall, Blackburn, Bhat-Patel, Schumacher.

ANNOUNCEMENT OF CONCURRENT MEETINGS: Mayor Hall announced that the City Council is serving as the Carlsbad Municipal Water District Board of Directors on Item Nos. 12, 13, 14, and

17. PLEDGE OF ALLEGIANCE: Mayor Pro Tern Bhat-Patel led the Pledge of Allegiance.

INVOCATION: None.

APPROVAL OF MINUTES:

Minutes of the Special Meeting held Dec. 10, 2019
Motion by Mayor Pro Tern Bhat-Patel, seconded by Council Member Blackburn, to approve the Minutes of the Special Meeting held on Dec. 10,2019 as presented. Motion carried unanimously, 4/0.

PRESENTATIONS: None.

PUBLIC COMMENT:

Glenn Bernard spoke about banning thoroughbred horse racing. He also spoke about the misconceptions of corporations.

Fred Sundquist, President of the Batiquitos Lagoon Foundation spoke about the draft Local Coastal Program update that was presented to the Planning Commission.

David Hill, member of the Batiquitos Lagoon Foundation spoke about the Local Coastal Permit Program's recent meeting at the Faraday Center and the need to have a further workshop.

Julie Ajdour spoke about her concerns over the ad-hoc committee for the Village Barrio Master Plan not including input from the homeowners in the area.

PUBLIC REPORT OF ACTION TAKEN IN CLOSED SESSION: None.

March 22, 2022 Item #4 Page 30 of 181

Dec. 17, 2019 Carlsbad City Council Regular Meeting Page 7 Mayor Hall opened the duly noticed Public Hearing at 6:56 p.m.

Seeing no one wishing to speak, Mayor Hall closed the duly noticed Public Hearing at 6:56 p.m.

City Attorney Celia Brewer titled Ordinance No. CS-368
Motion by Mayor Pro Tern Bhat-Patel, seconded by Council Member Blackburn, to introduce Ordinance No. CS-368 and adopt Resolution No. 2019-265. Motion carried unanimously, 4/0.

19. AMENDMENT TO THE CONDITIONS OF THE TENTATIVE TRACT MAP AND SITE DEVELOPMENT PLAN FOR PROJECT LOCATED AT 2646 STATE STREET - THE SEAGLASS — Adoption of Resolution No. 2019-266 approving Amendment No. Amend 2019-0006 and Amendment No.

Amend 2019-009, amendments to Tentative Tract Map No. CT 2018-0004 and Site Development Plan No. SDP 2018-0021, to satisfy the inclusionary requirement with the purchase of one inclusionary housing credit from Tavarua for an eight-unit, residential air- space condominium project located at 2646 State Street. Case No. Amend 2019-006/SDP 2019-0009 (DEV2017-0236). (Staff contact: Shannon Harker, Community & Economic Development)
City Manager's Recommendation: Take public input, close the public hearing and adopt the resolution.

City Planner Don Neu and Associate Planner Shannon Harker presented the report and reviewed a PowerPoint presentation (on file in the Office of the City Clerk).

Mayor Hall opened the duly noticed Public Hearing at 7:15 p.m.

Seeing no one wishing to speak, Mayor Hall closed the duly noticed Public Hearing at 7:15 p.m.

Council Member Blackburn expressed concern over the price of an inclusionary housing unit being bought for $84,000. He also added that the policy needs to be reviewed soon.

Minute Motion by Council Member Schumacher, seconded by Mayor Pro Tern Bhat-Patel to place on a future agenda item the initiation of a nexus study of the Housing In-Lieu fee and Housing Credits 4/0_
Motion by Mayor Pro Tern Bhat-Patel, seconded by Council Member Blackburn, to adopt Resolution No. 2019-266. Motion carried, 3/1. (Schumacher No)

20. SAN DIEGO COUNTY ACQUISITION OF PROPERTY WITHIN THE MCCLELLAN-PALOMAR AIRPORT RUNWAY PROTECTION ZONE — Adoption of a resolution pursuant to California March 22, 2022 Item #4 Page 31 of 181

Exhibit 5
Policy No. 57
CITY OF CARLSBAD Date Issued August 8. 1995
Effective Date August 8, 1995
COUNCIL POLICY STATEMENT Cancellation Date
Supersedes No.

General Subject: AFFORDABLE HOUSING
Specific Subject: Off-site and Combined
Inclusionary Housing Projects
Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

BACKGROUND
The City's Inclusionary Housing Ordinance (CMC Chapter 21.85) establishes certain requirements under which residential developers must provide housing that is affordable to lower-income households as a condition of project approval and permit issuance.

The Ordinance provides that inclusionary units "should be built on-site and, wherever reasonably possible, be distributed throughout the project site." The Ordinance also provides that "circumstances may arise... in which the public interest would be served by allowing some or all of the inclusionary units associated with one project site to be produced and operated at an alternative site or sites." This alternative is described as a "Combined Inclusionary Housing Project" or "Combined Project". The Ordinance, in addressing Combined Projects, states that "it is the exclusive prerogative of the final decision making authority of the City to determine whether or not it is in the public interest to authorize the residential sites to form a Combined Inclusionary Housing Project."

PURPOSE
It is the purpose of this policy to establish the criteria which will be utilized in order to make the necessary finding that off-site satisfaction of an inclusionary housing requirement, when proposed through a Combined Project, is in the public interest.

POLICY
The following criteria will be applied in order to make the necessary public interest finding. Each criteria is defined in terms of specific questions which, when affirmatively answered, would support an off-site option:

March 22, 2022 Item #4 Page 32 of 181

Policy No. 57
CITY OF CARLSBAD Date Issued August 8, 1995
Effective Date August 8. 1995
COUNCIL POLICY STATEMENT Cancellation Date
Supersedes No.

General Subject: AFFORDABLE HOUSING
Specific Subject: Off-site and Combined
Inclusionary Housing Projects
Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

1. Feasibility of the On-site Proposal.
• Are there significant feasibility issues due to factors such as project size, site constraints, and competition from multiple projects that make an on-site option impractical? ▪ Will an affordable housing product be difficult to integrate into the proposed market development because of significant price and product type disparity? • Does the on-site development entity lack the capacity to deliver the proposed affordable housing on-site?

2. Relative Advantages/Disadvantages of the Off-site Proposal • Does the off-site option offer greater feasibility and cost effectiveness than the on-site alternative, particularly regarding potential local public assistance and when applying the City's Affordable Housing Financial Assistance Policy.
• Does the off-site proposal have location advantages over the on-site alternative, such as proximity to jobs, schools, transportation, services; less impact on other existing developments, etc.?
• Does the off-site option offer a development entity with the capacity to deliver the proposed project?
• Does the off-site option satisfy multiple developer obligations that would be difficult to satisfy with multiple projects?
March 22, 2022 Item #4 Page 33 of 181

March 22, 2022 Item #4 Page 34 of 1.81

Policy No. 57
CITY OF CARLSBAD Date Issued August 8. 1995
Effective Date August 8, 1995
COUNCIL POLICY STATEMENT Cancellation Date
Supersedes No.

General Subject: AFFORDABLE HOUSING
Specific Subject: Off-site and Combined
Inclusionary Housing Projects
Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

Advancing Housing Goals
Does the off-site proposal advance and/or support City housing goals and policies as expressed in the Housing Element, CHAS and Inclusionary Housing Ordinance? It is likely that off-site proposals will involve "mixed" results with the application of the above criteria. The "public interest" finding shall be made when a Combined Project Review Committee made up of the City Manager, City Attorney, Community Development Director, Financial Management Director, Planning Director, Housing & Redevelopment Director, and the Mayor (ex-officio), reaches consensus that a proposal substantially and affirmatively satisfies the above criteria and that this conclusion can be appropriately documented through the use of a Combined/Off-site Project Evaluation Assessment Worksheet. (Attachment 1).

PROCEDURE

1. Projects with an inclusionary housing obligation will be processed according to the requirements of the Inclusionary Housing Ordinance.

Project approvals must be conditioned with the option to propose an off-site method (i.e., Combined Project) of satisfying the inclusionary obligation. A project proposing an off-site option may or may not also propose an on-site option.

Prior to final map or issuance of building permits, applicants must submit an Affordable Housing Agreement as described in the Inclusionary Housing Ordinance which specifically describes any off- site proposal.

Off-site proposals in the form of a draft Affordable Housing Agreement will be reviewed by the Combined Project Review Committee and it will be determined if the necessary findings can be made by staff.

March 22, 2022 Item #4 Page 35 of 181

Policy No. 57
CITY OF CARLSBAD Date Issued August 8. L995
Effective Date August 8, 1995
COUNCIL POLICY STATEMENT Cancellation Date
Supersedes No.

General Subject: AFFORDABLE HOUSING
Specific Subject: Off-site and Combined
Inclusionary Housing Projects
Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

Staffs findings and recommendation, including the Combined/Off-site Project Assessment Worksheet, will accompany the Affordable Housing Agreement to the Housing Commission for action.

Prior to final map or issuance of building permits, the proposed Affordable Housing Agreement will be considered by City Council along with the recommendation of staff and Housing Commission.

City Council will be the final decision making authority in determining whether an off-site proposal is in the public interest and permitting this option.

OFF-S1TE AND COMBINED INCLUSIONARY HOUSING PROJECT

ASSESSMENT WORKSHEET
---......, BACKGROUND: . .

1. Applicant Name and Address:

2. Off-site or Combined Project Name:

3. Description of Project with Inclusionary Housing Obligation:

4. Proposed On-site Project Description (if any):

5. Proposed Off-site Project Description:

6. Description of On-site Project Constraints:

March 22, 2022 _Rem #4_ Riage 36 of 181 Attachment "1" to Council FoliCy taternent rvo. b7

. . • . WORKSHFET
. ..

AsS8SSMENTC0A.itLusION
. (Chet* appropriate box) • .• . . .... .
.

AS$,ESSMENT OR/MR/A .

DOES NOT SUpPORT
•CfPE-strE•PROPOSAI, _. . i.N.coNatiSivE
&OPitikts OFF-SRE

PROPOSAL
—

1. Feasibility of the On-site Proposal.

a. Are there significant feasibility issues due to

factors such as project size, site constraints,
amount and availability of required subsidy,
and competition from multiple projects that
make an on-site option impractical?

,

Brief Narrative:

b. Will an affordable housing product be difficult

to integrate into the proposed market

development because of significant price
and product type disparity?

Brief Narrative:

c. Does the on-site development entity have
the capacity to deliver the proposed

affordable housing on-site?
Brief Narrative:

2. Relative Advantages/Disadvantages of the Off

site Proposal.
a. Does the off-site option offer greater feasibility
and cost effectiveness than the on-site
alternative, particularly regarding potential
local public assistance?
March 22, 2022
2 Item #4 Page 37 of 181

WORKSHEET.
• ASSESSMENT CONCLUSION
(Check appropriate box)
•DOES NOT SUPPORT SUPPORTS or-FrE
OFF-&1l PROPOSAL INCONCLUSIVE• PROPOSAL ASSESSMENFCRITERIA Brief Narrative:
b. Does the off-site proposal have location
advantages over the on-site alternative, such
as proximity to jobs, schools, transportation,
services; less impact on other existing
developments, etc.?
Brief Narrative:
c. Does the off-site option offer a development
entity with the capacity to deliver the proposed
project?
Brief Narrative:
d. Does the off-site option satisfy multiple

developer obligations that would be difficult
to satisfy with multiple projects?
Brief Narrative:

3. Advancing Housing Goals and Strategy

a. Does the off-site proposal advance and/or
support City housing goals and policies
expressed in the Housing Element, CHAS
and Inclusionary Housing Ordinance?
Brief Narrative:
- . .

SUMMARY

DOES NOT SUPPORT

OFF-SITE PROPOSAL
•

INCONCLUSIVE

SUPPORTS OFF-SRE

PROPOSAL

March 22, 2022
3 Item #4 Page 38 of 181

Date Considered by Review Committee:

Review Committee Action:

Action:
ar
March 22, 2022 4 Item #4 Page 39 of 181

EXHIBIT 6

CITY OF CARLSBAD

COUNCIL POLICY STATEMENT
General Subject: AFFORDABLE HOUSING
Specific Subject: Sale of Affordable Housing
Credits
Policy No. 58
Date Issued September 12, 1995
Effective Date sept. 12, 1995
Cancellation Date
Supersedes No.

Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

PURPOSE
To establish a policy to be followed by City Council and City staff in selling Affordable Housing Credits, controlled by the City, to developers who will use the Credits to satisfy obligations to provide affordable housing pursuant to the City's Inclusionary Housing Ordinance (CMC Chapter 21.85).

BACKGROUND
In the development of the 344-unit affordable housing project known as Villa Loma in the Southwest Quadrant of the City, the developers and the City created a project which may be treated as a Combined Project as defined in the City's Inclusionary Housing Ordinance. With City Council approval, Combined Projects allow "some or all of the inclusionary units associated with one residential project site to be produced and operated at an alternative site". The "alternative site" becomes a Combined Project. Villa Loma was conceived and developed with City participation based on the creation. of 184 excess affordable housing units which would be available to satisfy other developers' inclusionary housing obligations thus making it a potential Combined Project. City financial participation in the project was also based on the concept of recovering costs through the sale of the excess units. Furthermore, Villa Loma was structured to give the City control of these units (Affordable Housing Credits or "Credits") and their sale to potential Combined Project participants. Therefore, it is necessary to establish a policy to guide the City in the effective implementation of these Affordable Housing Credit sales transactions.

POLICY
Two basic factors will be considered in a Credit sale transaction — the financial aspect, which is the Credit pricing -- this determines cost to a purchaser and revenue to the City; and the affordable housing aspect, which is the use of this mechanism to satisfy a developer's obligation under the Inclusionary Housing Ordinance. Based on these considerations, the following will guide Credit sales:

March 22, 2022 Item #4 Page 40 of 181

Policy No. 58

CITY OF CARLSBAD Date Issued Sept. 12, 1995

Effective Date Sept. 12, 1995

COUNCIL POLICY STATEMENT
General Subject: AFFORDABLE HOUSING
Specific Subject: Sale of Affordable Housing
Credits
Cancellation Date
Supersedes No.

Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

Price. The Credit price will be determined according to the following formula which divides the local financial contribution provided to the Villa Loma project by the total number of Credits available.

The local financial contribution consists of all City financial assistance provided to the project (either as loans or expenditures for land including accrued interest on such amounts for the period of time they are outstanding); and the local developer contribution to the project provided in order to satisfy an affordable housing obligation):

Affordable Housing Credit Pricing Formula
= Unit Price of Affordable
+ Number of Affordable Housing Credits (Rounded
Local Financial Contribution Housing Credits Available to nearest $1,000)* City Contribution $4.2 Million*
Developer Contribution 184 $28,000*
(Aviara Land Associates) .9
TOTAL $5.1 Million
* To be adjusted with the addition of interest.

Terms of Purchase and Sale. The commitment to purchase and sell Credits will be accomplished through an Affordable Housing Agreement as required by the Inclusionary Housing Ordinance. This Agreement will contain the terms of the Credit sale and will acknowledge the satisfaction of an affordable housing obligation through participation in a Combined Project (Villa Loma).

March 22,2022 Item 114 rage 41 of 181

Policy No. 58
CITY OF CARLSBAD Date Issued Sept. 12. 1995
Effective Date Sept. 12, 1995
COUNCIL POLICY STATEMENT Cancellation Date
Supersedes No.

General Subject: AFFORDABLE HOUSING
Specific Subject: Sale of Affordable Housing
Credits
Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

Selection of Purchasers. The following procedure will apply to the selection of purchasers and allocation of Credits:

1. Project Review. Staff, through the Combined Project Review Committee (see Council Policy No. 57) will review all applications and approved projects with inclusionary requirements and determine which projects will be recommended to satisfy their obligations through the purchase of Credits. If the number of acceptable projects have affordable housing requirements which exceed the available number of Credits, projects will be ranked and allocated Credits accordingly. Projects will be reviewed and ranked using the following criteria:
a) The immediacy of the need to satisfy an affordable housing obligation with respect to the market rate project that is generating the obligation. b) The readiness and capacity of the developer to enter into an Affordable Housing Agreement and perform under its terms.
c) The acceptability of the Combined Project as an off-site option in lieu of the satisfaction of the affordable housing obligation on-site with respect to the project that is generating the obligation (see Council Policy No. 57).

2. Electing to Purchase Credits. Developers will be notified of staffs recommendation to permit the purchase of Credits and given the opportunity to accept or reject this option.

3. Reservation of Credits. Developers wishing to use the option of purchasing Credits must have their projects approved with conditions allowing this option. In addition to Planning Commission approval, the recommendation of the Housing Commission will be required for the Credit purchase option of satisfying the Inclusionary Housing Obligation. When a project is approved (e.g., tentative map) with the Credit purchase condition, a reservation of the Credits is made for the project.

March 22, 2022 Item #4 Page 42 of 181

Policy No. 58

CITY OF CARLSBAD Date Issued Sept . 12, 1995

COUNCIL POLICY STATEMENT
Effective Date se_p t 12, 1995
Cancellation Date

Supersedes No.

General Subject: AFFORDABLE HOUSING
Specific Subject: Sale of Affordable Housing
Credits
Copies to: City Council, City Manager, City Attorney, Department and Division Heads, Employee Bulletin Boards, Press, File.

4. Affordable Housing Agreement. Within sixty (60) days of the approval of the Credit purchase condition, the developer must deliver to the Housing and Redevelopment Director a signed Affordable Housing Agreement in the form prescribed by the City with a non-refundable deposit in an amount equal to 10% of the total Credit sale price, The Affordable Housing Agreement will be scheduled for City Council consideration and, if and when approved, will be executed by the City. The Affordable Housing Agreement will require payment of the balance of the purchase price upon execution and prior to final map or issuance of a building permit.

5. Failure of Developer to Perform or Denial of Purchase Option. If the developer is unable to perform as required, or is denied the option of purchasing Credits, the Credits will be made available to another project(s), subject to this process.

6. This policy is subject to all other requirements of the Inclusionary Housing Ordinance.

March 22, 2022 Item #4 Page 43 of 181

Exhibit 7

CITY OF CARLSBAD

COUNCIL POLICY STATEMENT

Policy No. 68
Date Issued 10/19/04
Effective Date 10/19/04
Cancellation Date N/A
Supersedes No. N/A
General Subject: Affordable Housing
Specific Subject: Inclusionary Housing Incentive Credit Schedule Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads, Employee Bulletin Boards, Press, File
PURPOSE:

Pursuant to 21.85.060 of the Carlsbad Municipal Code, the City Council shall adopt a schedule of inclusionary housing incentive credit to specify developer eligibility for extra credit to reduce his/her total inclusionary housing requirement to less than 15% of all residential units approved. The noted schedule is set forth within this City Council Policy, and it may be amended from time to time to reflect any changes in the incentive credit(s) policy.

BACKGROUND:

When the Inclusionary Housing Ordinance (CMC 21.85) was adopted in 1993, and then amended in 2000, it was the City Council's expressed intent to allow housing developers to reduce their total inclusionary housing obligation to less than 15% if the developers provided a more desirable product or otherwise made a proposal which went above and beyond the intent of the Ordinance in terms of product type or affordability of those units. At the time of the Ordinance development, this policy on the schedule for incentive credits (giving more than one unit credit) was not adopted. The schedule is being adopted at this time to guide the City in its application of the requirements for affordable housing development.

POLICY:

The City Council will grant incentive credit based on the criteria and conditions set forth in the chart below. The project must meet all of the noted product criteria and development conditions to qualify for the incentive credit.

March 22, 2022 Item #4 Page 44 of 181

CITY OF CARLSBAD

COUNCIL POLICY STATEMENT
General Subject: Affordable Housing

Policy No. 68
Date Issued 10/19/04
Effective Date 10/19/04
Cancellation Date N/A
Supersedes No. N/A
Specific Subject: Inclusionary Housing Incentive Credit Schedule Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads, Employee Bulletin Boards, Press, File
lnclusionary Housing Incentive Credit Schedule
Desirable Product &
Development Conditions
Incentive
Credit
Minimum Inclusionary Housing
Requirement
Product:

Newly Constructed For-Sale 1.2 per unit 12.5%
Town Home, Condominium, or

(of total housing units)
Single Family Home

Development Conditions:

1. The unit must be
affordable to very low
(50% or below AM) or
extremely low income
(30% or below AMI)
households.

2. The unit is a for-sale
product.

3. The unit must be
located on the same
site as the
development that has
the inclusionary
requirement.

4. The developer must
not be obtaining any
financial assistance
from the City.

March 22, 2022 Item #4 Page 45 of 181 (,,

CITY OF CARLSBAD

COUNCIL POLICY STATEMENT
General Subject: Affordable Housing

Policy No, 68
Date Issued 10/19/04
Effective Date 10/19/04
Cancellation Date N/A
Supersedes No. N/A
Specific Subject: Inclusionary Housing Incentive Credit Schedule Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads, Employee Bulletin Boards, Press, File
To assist with application of the above noted incentive credit schedule, the following examples are provided for further explanation purposes.

Example 1 — Small to Medium Size Project:

Developer proposes to build a total of 78 for-sale town homes within a new development, which has an inclusionary housing requirement Per current Indusionary Housing requirements, the developer must provide 12 of those units (15%) as affordable to low income households (80% of the AMI or below). Under the above noted credit schedule, the developer could receive extra credit if 1) the affordable product within that development is also a for-sale town home, and 2) it will be affordable to very low or extremely low income households (50% of AMI or below), and 3) the developer obtains no financial assistance from the City. The credit would work as follows:
12 low income for-sale affordable units
÷ 1.2 unit credit
L--- 10 very low income units
(Developer could provide 10 very low income units
rather than 12 low income units)
10 units +. 78 total housing units = 12.8% of the total units

12.8% exceeds the 12.5% minimum
Under this scenario, the developer meets all of the extra credit criteria and could be allowed to construct 10 units rather than 12 units (2 fewer units), and would satisfy the City's inclusionary housing requirements.

Exampje 2 — Large Size Project:

Developer proposes to build a total of 1078 for-sale town homes within a development. Per current Inclusionary Housing Ordinance requirements, the developer must provide 162 of those units (15%) as affordable to low income households (80% of the AMI or below). Under the noted credit policy above, the developer would receive extra credit if 1) the affordable product within that development is also a for-sale town home, and 2) it will be affordable to very low or extremely low income households (50% of AMI or below), and 3) the developer obtains no financial assistance from the City. The credit would work as follows:

March 22, 2022 Item #4 Page 46 of 181 7

CITY OF CARLSBAD

COUNCIL POLICY STATEMENT
General Subject: Affordable Housing

Policy No. 68
Date Issued 10/19/04
Effective Date 10/19/04
Cancellation Date N/A
Supersedes No. N/A
Specific Subject: Inclusionary Housing Incentive Credit Schedule Copies to: City Council, City Manager, City Attorney, Department Heads and Division Heads, Employee Bulletin Boards, Press, File
162 low income for-sale affordable units ÷ 1.2 unit credit = 135 units (Developer could provide 135 very low income units
rather than 162 low income units)
135 ÷ 1078 total housing units = 12.5%

12.5% is the minimum inclusionary housing requirement
permitted under this policy
Under this scenario, the developer meets all of the extra credit criteria and could be allowed to construct 135 units rather than 162 units (27 fewer units), and would satisfy the City's inclusionary housing requirements.

PROCEDURE:

The request for affordable housing incentive credit will be processed together with all other entitlements to arrow for development of a housing project. As long as a project is consistent with this City Council policy, the incentive credit may be granted by either the Planning Commission, Design Review Board, Housing and Redevelopment Commission, and/or City Council.

March 22, 2022 Item #4 Page 47 of 181

Exhibit 8
INCLUSIONARY HOUSING 1N-LIEU FEE UPDATE
Prepared for:

City of Carlsbad
Prepared by:

Keyser Marston Associates, Inc.

April 2021
March 22, 2022 Item #4 Page 48 of 181

TABLE OF CONTENTS
I. Introduction 1
II. Key Findings 3
III. In-Lieu Fee Financial Analysis: Citywide 8
IV. In-Lieu Fee Financial Analysis: Village and Barrio Master Plan Area 16 V. Limiting Conditions 22

APPENDICES
Appendix 1 Comparison of Affordable Housing Fees, San Diego County Appendix 2 Key Assumptions and Findings - 15% Low Income Appendix 3 In-Lieu Fee Financial Analysis —Citywide
Appendix 4 In-Lieu Fee Financial Analysis - Village and Barrio Appendix 5 Viability of 20% Low Income Inclusionary Requirement Appendix 6 Estimate of Affordable Sales Prices and Rents Appendix 7 Residential Market Data
March 22, 2022 Item #4 Page 49 of 181

I. INTRODUCTION
A. Objective
This report presents the economic analysis prepared by Keyser Marston Associates, Inc. (KMA) for the City of Carlsbad (City) to evaluate the potential of updating the City's existing inclusionary housing in- lieu fee.

B. City of Carlsbad Existing Inclusionary Housing Ordinance The City's Inclusionary Housing Ordinance (CMC §21.85) was established in 1993 and requires that all residential developments proposing seven or more units restrict 15 percent of the total number of homes in a project as affordable to low-income households. This obligation is fulfilled through construction of a variety of rental or ownership units, both on and off-site. Affordable rental units must be restricted for 55 years; affordable for-sale units must remain affordable for 30 years after the initial sale of the unit.'
Some developments (specifically, projects of six or fewer dwelling units) have the option to satisfy their affordable housing obligation through payment of an inclusionary housing in-lieu fee. Six or fewer units was used as the eligibility threshold because the affordable unit calculation resulted in a number of less than one (i.e., 6 units multiplied by 15% equals 0.9 units).

The in-lieu fee was initially set at $11,485.46 per market-rate unit. The fee was recalculated in 1996 based on 15% of the City's per-unit subsidy for the Villa Loma Apartment community ($30,100), resulting in a reduction of the fee to $4,515 per market-rate unit. The fee amount has remained unchanged since. Through this fee, roughly $1.7 million has been collected since inception of the program.

C. Methodology
KMA performed the following key work tasks in completing this analysis.

1. Reviewed the City's existing Inclusionary Ordinance and historical results in terms of unit production and in-lieu fee revenue.

2. Compiled data pertaining to inclusionary housing in-lieu fees and/or affordable housing impact fees currently being charged by other cities in San Diego County. ' After the first 15 years, the owner of an affordable unit may sell at a market price if the City does not exercise its option to purchase at an affordable price. In this case, the City recaptures its subsidy plus a proportionate share of any appreciation. Funds recaptured by the City shall be used in assisting other eligible households with home purchases at affordable prices.

Keyser Marston Associates, Inc. Page 1
April 12, 2021
21017kal
11060.012.007
March 22, 2022 Item #4 Page 50 of 181

3. Reviewed market trends data, land values, development cost estimates, and other industry standards for both rental and for-sale residential development.

4. Formulated residential development prototypes in coordination with City planning staff.

5. Prepared pro forma financial models to estimate the residual land value generated by each residential prototype under two scenarios: (a) at 100% market-rate; and (b) assuming the City's existing inclusionary requirement of 15% at Low Income.

D. Organization of Report
This report is organized into the following key sections:
• Following this introduction, Section II presents the KMA key findings. • Section III presents the Citywide in-lieu fee financial analysis. • Section IV presents the financial analysis for an in-lieu fee for the Village and Barrio Master Plan area (Village/Barrio).
• Section V presents limiting conditions pertaining to this report.

Keyser Marston Associates, Inc.

April 12, 2021
21017kal
11060.012.007
March 22, 2022

Item #4 Page 51 of 181

II. KEY FINDINGS
A. Potential Fee Levels
The City requested that KMA analyze potential inclusionary in-lieu fee levels Citywide and within the Village/Barrio. In order to provide the City with a framework for setting possible fee levels, KMA considered two approaches: (1) the economic impact of incorporating affordable housing on-site; and (2) the funding level required for the market-rate developer or City to implement targeted inclusionary housing production in an off-site location.

Potential Fee Levels
As presented in Table 11-1, based on the findings from the two approaches noted above, the City may wish to consider a Citywide in-lieu fee of up to $31,240 per market-rate unit, or between $15 and $25 per square foot (SF) of market-rate residential living area. In the Village/Barrio, the City may wish to consider a potential fee of up to $34,940 per market-rate unit, or between $25 and $35 per SF of market-rate residential living area.

Table 11-1: Potential Fee Levels — 15% Low Income

Citywide Village/Barrio
Per Market-Rate Unit $31,240 $34,940
Per Net SF Market- Rate Unit $15 - $25 $25 - $35
As noted above, the fee levels are expressed on both a per-unit and per-SF basis. A per-SF in-lieu fee, as compared to a flat fee approach, recognizes the various residential unit sizes produced both Citywide and in the Village/Barrio and avoids overly burdening the production of small units.

Potential Fee Level Adjustments
Some jurisdictions apply an automatic adjustment to their in-lieu fee on an annual basis. This provision ensures that the fees charged will adjust annually to reflect changes in housing production costs. There are a number of potential indices that could be used to adjust fee levels in the future. A review of potential indices that could be used to adjust the fee in the future is presented in Table 11-2.

Keyser Marston Associates, Inc.

April 12, 2021
21017kal
11060.012.007
March 22, 2022

Item #4 Page 52 of 181

Table 11-2: Potential Indices for Fee Level Adjustment
Index Concept / Description Advantages Disadvantages
#1
Building Cost
Index (BCI)
Fees go up or down based on
building construction costs.

Published by Engineering News
Record (ENR).

Available at national average and
for 20 cities (not Carlsbad or San
Diego; Los Angeles is nearest city
available),
Very well established.

Consistent fee burden
over time relative to
construction costs.

May not trend with
changes in non-
construction
development costs
(land, other soft
costs).

May not trend with
cost to produce
affordable units.

Only addresses cost
side of the equation.
#2
Construction
Costs Index
(CC1)
Also published by ENR and
similar to Building Cost Index but
with different weighting of labor
and material cost categories.

Same as above. Same as above.
#3
Consumer Price
Index (CPI)
Published by the U.S. Bureau of
Labor Statistics. Available for
major metro areas including San
Diego.

Very well established.

Generally tracks with
inflation.

Produced by neutral
governmental agency.

May not trend with:
- Construction costs
(consistent fee
burden)
or
- Cost to produce
affordable units
(consistent ability
to mitigate
impacts)
As shown below in Table 11-3, between 1996 and 2020, the average annual growth range for the above indices ranged between 2.57% and 2.69%. Had the annual growth rates from these indices been applied to the City's existing $4,515 in-lieu fee in 1996, the in-lieu fee would have increased to between $8,308 and $8,528 per market-rate unit in 2020.

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Table 11-3: Estimated Fee Level Adjustment — Existing In-Lieu Fee

•- • '

Consumer Price
Index (CPI)
Existing In-Lieu Fee $4,515 $4,515 $4,515
Average Annual Growth
Rate, 1996-2020

2.61% 2.57% 2.69%
Estimated In-Lieu Fee, 2020 $8,387 $8,308 $8,529
B. Economic Impact of Potential Fee Levels
The KMA analysis also estimated the economic impact of the potential fee levels on project feasibility.

The economic impact of the in-lieu fees was measured against residual land value and developer profit.

Residual land value is defined as the as the maximum land value supported by a proposed development.

It is calculated by estimating the total value upon completion (or total available funding sources) and subtracting the estimated total development costs (other than land acquisition costs) required to develop the project.

Specifically, the residual land value for each residential prototype is derived from the following calculation.

Table 11-4 provides a summary of the economic impact as measured by comparing: (a) the residual land value and developer profit generated from the optimal approach to fulfilling the City's existing 15% inclusionary requirement, whether on-site or off-site production, against (b) the residual land value and developer profit resulting from a potential in-lieu fee of $15 to $25 per SF of market-rate residential living area Citywide and a potential in-lieu fee of $25 to $35 per SF in the Village/Barrio. The figures noted below reflect the average outcome for the four (4) Citywide and four (4) Village/Barrio residential development prototypes evaluated in this study.

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Table 11-4: Estimated Impact of Potential In-Lieu Fee — 15% Low Income

Citywide Village/Barrio
Average Impact for
Four (4) Residential
Development
Prototypes
Average Impact for
Four (4) Residential
Development
Prototypes
Potential Fee Levels $15/5F i $25/SF $25/SF I $35/SF
Impact on Residual Land Value I 7.8% I -4.5% 3.3% i -3.1% Impact on Developer Profit -3.2% I -5.3% -3.8% I -5 4°/ i . 0 As shown in Table 11-4, the potential in-lieu fee levels have relatively minor economic impacts on residential development projects when compared to a developer's existing options for compliance with the inclusionary requirement, i.e., producing inclusionary units either on- or off-site. The "low" potential fee level demonstrates either a positive or minor negative impact as compared to existing compliance methods. The "high" fee demonstrates relatively minor negative impacts as compared to existing compliance methods.

For any new or increased in-lieu fee, a period of adjustment may be needed for the development marketplace to adjust to the new fee. Specifically, developers and landowners will need to consider how to incorporate increased fees into their financial pro formas and/or evaluate alternative means of compliance.

C. Survey of San Diego County Jurisdictions
KMA conducted a survey of inclusionary in-lieu fees and affordable housing impact fees in other San Diego County communities. The survey is summarized in Table 11-5 below in comparison with potential fee levels for the City of Carlsbad. Detailed information on each jurisdiction's inclusionary program and fee levels is presented in Appendix 1.

Table 11-5: Comparison of Affordable Housing Fees, Carlsbad vs. San Diego County Jurisdictions

City of Carlsbad
San lego _ ',-7„.,
, -
' •kangealtrid
,
Inclusionary Housing
Required Threshold
7 units 1 unit - 50 units
% of Affordable Units
Required
15% 10% - 20%
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Table 11-5: Comparison of Affordable Housing Fees, Carlsbad vs. San Diego County Jurisdictions

City of Carlsbad
San Diego County
Jurisdictions
(range of findings) (1)
In-Lieu Fee Option
Available to projects
Up to 6 units
Available to
Available to all
rental or
- project of all
fractional
sizes
units only
In-Lieu Fee Amount
Current Fee: $4,515/unit
Potential Fee Levels:
• Citywide: $31,240/unit
$15 - $25/SF
• Village/Barrio: $34,940/unit
$25 - $35/SF
$500/Unit $7,000/Unit
-
$8.82151 $31.00/SF

(1) See Appendix 1 for a detailed survey of San Diego County jurisdictions.

Inclusionary housing programs and in-lieu fees vary widely throughout the County, with varying amounts of fee levels and threshold requirements for the payment of in-lieu fees. For example, some jurisdictions allow the payment of an in-lieu fee for projects of all sizes; others, like the City, limit the payment of in-lieu fees to only those projects that meet specific criteria.

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III. IN-LIEU FEE FINANCIAL ANALYSIS: CITYWIDE
A. Residential Development Prototypes
Table III-1 provides a summary of the residential development prototypes identified for the Citywide in- lieu fee financial analysis. The Citywide prototypes are illustrative of the types of development projects occurring, and anticipated to occur, throughout the City. Three (3) new construction for-sale residential prototypes and one (1) new construction rental residential prototype were identified based on discussions with City staff. While this level of feasibility analysis is useful for conceptual planning purposes, the actual circumstances for individual projects — physical, planning, market, financial, and other factors — will likely vary from the findings presented in this report.

Table Ill-1: Project Descriptions for Development Prototypes - Citywide

FOR-SALE RENTAL
Single-Family
Large Lot
Single-Family
Medium Lot

5.0 Acres
Townhomes Garden
Apartments

5.0 Acres Site Area 10.0 Acres 3.0 Acres
Density (Units/Acre) 3.2 6.0 15.0 25.0
Number of Units 32 Units 30 Units 45 Units 125 Units
Unit Mix 3 and 4
Bedrooms
3 and 4
Bedrooms
2 and 3
Bedrooms
1, 2, and 3
Bedrooms
Stories 2 Stories 2 Stories 2 Stories 3 Stories
Average Unit Size 3,203 SF 2,200 SF 1,580 SF 991 SF
B. Projected Market Sales Prices and Rent
KMA surveyed new for-sale and rental developments throughout the City. The purpose of the survey was to derive estimates of the currently achievable market prices and rental rates for the types of developments likely to be constructed in the City. The base case market-rate sales prices and monthly rent estimates that are used in the Citywide financial feasibility analyses are presented in Table III-2.

Table 111-2: Projected Market Sales Prices and Rents - Citywide Average $/SF
Single-Family
Large Lot

FOR-SALE RENTAL
Garden
Apartments
Single-Family
Medium Lot
$477/SF
Townhomes
$467/SF $439/SF $2.74/SF
Average Unit Size 3,203 SF 2,200 SF 1,580 SF 991 SF
Average Market Price/
Monthly Rent $1,406,000 $1,050,000 $738,000 $2,720
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C. Affordable Price and Rent Calculation
For the purposes of this financial analysis, the maximum affordable sales prices and rents for the income-restricted units were calculated based on the standards imposed by California Health and Safety Codes Section 50052.5 (ownership) and Section 50053 (rental). The detailed calculations are presented in Appendix 6; the key assumptions and results are summarized below.

Affordable Sales Price
• The price restrictions were calculated for three different for-sale residential prototypes (single- family large lot, single-family medium lot, and townhomes). • The household income information used in the calculations is based on 2020 income statistics for San Diego County as a whole. The household incomes are published annually by the U.S.

Department of Housing and Urban Development (HUD).
• Household size appropriate for the unit were based on the City's Inclusionary Housing Calculations guidelines.
• Maximum monthly ownership housing payments were calculated. as equal to 1/12 x 30% x 80% Area Median Income (AM I) adjusted for household size.
• Housing-related costs reflecting the specifics of each residential prototype and current lending industry underwriting criteria were determined as follows:
o Utilities based on the City of Carlsbad utility allowance schedule, effective December 1, 2019, and the assumption that the homeowner's utility costs are comprised of gas cooking and water heating, gas heating, other basic electric services, water and sewer, and trash. o Homeowner Association (HOA) dues, reflecting an allowance for structure insurance, maintenance, and reserves.
o Property taxes, assuming a typical City tax rate of 1.20% of assessed value. o Supportable mortgage, assuming a 30-year loan, 4.5% interest rate, and a 10.0% down payment.

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Affordable Rent
• The household income information used in the calculations of affordable rent were based on 2020 income statistics for San Diego County as a whole. The household incomes are published annually by HUD.
• The household size appropriate for the unit based on the City's Inclusionary Housing Calculations guidelines.
• Maximum monthly rental housing payment calculated as equal to 1/12 x 30% x 70% AMI (adjusted for household size), less adjustments for certain tenant-paid utilities. • Utilities based on the City of Carlsbad utility allowance schedule, effective December 1, 2019, and the assumption that the tenant's utility costs are comprised of gas cooking and water heating, gas heating, and other basic electric services.

The resulting average affordable sales prices and rents for each of the Citywide residential prototypes are presented in Table III-3.

Table 111-3: Affordable Sales Prices and Rents

FOR-SALE RENTAL
$415,000 $415,000

Townhomes
$1,781
Average Affordable Sales Price
and Monthly Rent @ Low
Income
$330,000
D. Approach 1: Economic Impact of Incorporating Affordable Housing On-Site To estimate the economic impact of incorporating inclusionary housing requirements on-site, KMA prepared financial pro forma models for each Citywide residential development prototype. The financial pro forma models present comparative impacts of: (a) a 100% market-rate residential development, as compared to (b) the City's current inclusionary housing requirement. Appendix 3 provides the detailed pro forma analyses prepared by KMA for each Citywide residential development prototype.

Attachments A through D within Appendix 3 are organized as follows:

Table 1 Project Description
Table 2 Estimate of Development Costs
Table 3 Estimate of Sales Proceeds or Annual Revenue and Residual Land Value Keyser Marston Associates, Inc.

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Each attachment displays a financial pro forma model estimating the residual land value for: (1) a base case consisting of a 100% market-rate development; and (2) a development that complies with the City's existing inclusionary requirement, i.e., 15% at Low Income. The base case residual land value outcome can then be measured against the residual land value that is generated when the 15% Low Income requirement is imposed. The economic impact of incorporating the City's existing inclusionary requirement on-site, is summarized in Table III-4.

Table III-4: Economic Impact of Incorporating Affordable Housing On-Site - Citywide Residual Land Value Per Unit
Single-Family
Large Lot

FOR-SALE RENTAL
Garden
A . artments
$114,000
Average Single-Family
Medium Lot
$237,000
Townhomes
$147,000 100% Market-Rate $285,000 $196,000
85% Market-Rate / 15% Low
Income $150,000 $145,000 $92,000 $84,000 $118,000
Economic Impact of Incorporating Affordable Housing On Site Per Market -Rate Unit $135,000 $92,000 $55,000 $30,000 $78,000 Per Market-Rate Net SF $42.15 $41.82 $34.81 $30.27 $37.26 As shown in Table III-4, the economic impact of including 15% Low Income units on-site is estimated to range from $30,000 to $135,000 per unit, or $30 to $42 per SF, of market-rate residential living area.

E. Approach 2: Funding Level Required to Implement lnclusionary Housing Production in an Off-Site Location
KMA also prepared estimates of the affordability gaps associated with developing affordable housing in an off-site location. The purpose of this financial analysis was to estimate the funding gap that would be required for either a market-rate residential developer or the City to create the targeted inclusionary housing production in a separate off-site location.

As detailed in Appendix 3, Attachment E, the analysis assumed the off-site affordable housing project to be rental apartments, in a stacked flat configuration over tuck-under parking, consisting of 60 units on a

2.0-acre site. KMA estimated the development costs, operating budget, and anticipated funding sources for this off-site affordable housing development prototype.

The KMA analysis assumed that the affordable development is financed with Low Income Housing Tax Credits (Tax Credits) and Multi-family Housing Program (MHP) funds. The development budget was also assumed to include the payment of prevailing wages. Additional key assumptions used in the affordability gap analysis are as follows:

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• Total development costs, excluding acquisition, estimated at $392,000 per unit. • Acquisition costs estimated at $100,000 per unit.
• Monthly rents at an average of 50% AMI in order to competitively apply for 4% Tax Credits.

The resulting stabilized annual net operating income generated by the affordable units are shown in Table III-5.

Table III-5: Off-Site Affordable Units — Net Operating Income — Citywide Per Unit Per Year 50% AMI
Average Monthly Rent, 2020 $1,171
Effective Gross Income $13,450
(Less) Operating Expenses ($6,417)
Net Operating Income $7,033
Funding sources available for the affordable units are assumed to include a combination of first mortgage debt, Tax Credit equity investment, State of California MHP funds, funding from the Federal Home Loan Bank Affordable Housing Program (AHP), deferred developer fee/General Partner equity contribution, and income during lease-up. These potential funding sources are itemized in Table III-6.

Table III-6: Off-Site Affordable Units — Sources of Fund per Unit - Citywide Supportable Permanent Loan $113,000
Low Income Housing Tax Credit Equity $134,000
Multifamily Housing Program $50,000
Affordable Housing Program $10,000
Deferred Developer Fee/General Partner Equity $7,000
Income During Lease-Up $1,000
Total Sources of Funds $315,000
As shown in Table III-7, the affordability gap for the affordable units is estimated at $177,000 per Low Income unit. This figure is calculated as the difference between total development costs and total funding sources.

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$31,240
Per Market-Rate Unit
@ 15% Inclusionary Set-Aside
Affordability Gap per Off-Site Low-Income Unit $177,000 Table III-7: Off-Site Affordable Units — Affordability Gap per Unit - Citywide Total Sources of Funds $315,000
(Less) Total Development Costs ($492,000)
Affordability Gap per Affordable Unit $177,000
As shown above, KMA estimates that a Low Income rental unit developed Citywide has an estimated financing gap of $177,000. In other words, for the market-rate developer or City to facilitate creation of off-site Low Income units Citywide, it would need to contribute $177,000 per affordable rental unit. As shown in Table III-8, under the City's existing inclusionary requirement, the required number of off-site Low Income units is calculated against the total number of market-rate units approved plus the inclusionary units produced. This equates to $31,240 per market-rate unit developed (i.e., $177,000 ÷ 85% x 15%).

Table III-8: Estimate of Funding Gap for Off-Site Low Income Units - Citywide This funding gap outcome can be expressed on both a per-unit basis and per-SF basis relative to the market-rate residential development. KMA estimates that the City would need to receive an in-lieu fee ranging from $10 to $32 per SF, depending on the market-rate prototype, or an average of $19 per SF market-rate residential living area, as shown in Table III-9.

Table III-9: Funding Level Required to Create Affordable Housing Off-Site - Citywide

FOR-SALE RENTAL
Garden
Apartments
$31,240
Average Single-Family
Large Lot
$31,240
Single-Family
Medium Lot
$31,240
Townhomes
Per Market-Rate Unit $31,240 $31,240
Per Market-Rate Net SF $9.75 $14.20 $19.77 $31.52 $18.81 F. Range of Potential In-Lieu Fees
As summarized in Table III-10, in view of Approaches 1 and 2 above, the City may wish to consider a Citywide in-lieu fee of $31,240 per unit, or between $15 and $25 per SF of market-rate residential living area.

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Table III-10: Potential Fee Levels — 15% Low Income - Citywide

Approach to Setting Fee Levels
Potential
Fee Levels
Approach 1:

On-Site Production
Approach 2:

Off-Site Production
Per Market-Rate Unit
$30,000 - $135,000
Average: $78,000
$31,240 $31,240
Per Market-Rate Net SF
$30 - $42
Average: $37
$10 - $32
Average: $19
$15 - $25
G. Economic Impact of In-Lieu Fee Levels
The KMA analysis also estimated the economic impact of the potential fee levels on project feasibility.

For each residential prototype, KMA first compared the residual land value generated from incorporating affordable units on-site within a market-rate development vs. the funding level required for inclusionary housing production off-site. The approach that yielded the higher residual land value was deemed the "optimal approach" to inclusionary production that a developer would most likely choose.

KMA then compared the residual land value from the optimal approach to the residual land value generated when imposing a potential in-lieu fee of $15 to $25 per SF of market-rate residential living area. The difference in residual land value reflects the economic impact of the potential fee levels. The KMA findings are summarized in Table III-11, below.

Table Ill-11: Economic Impact of Potential In-Lieu Fee on Project Feasibility - Residual Land Value - Citywide

Single-Family
Large Lot

FOR-SALE RENTAL
Garden Average
Apartments
Single-Family
Medium Lot Townhomes
Residual Land Value ($/SF Site Area)

Approach 1: On-Site Production $11 $20 $32 $48 $28
Approach 2: Off-Site Production $19 $28 $40 $47 $34

Optimal Approach (On-Site vs. Off-Site Production)
Residual Land Value ($/SF Site Area) $19
Off-Site
$28
Off-Site
$40
Off-Site
$48
On-Site
$34
---

In-Lieu Fee @ $15/Net SF
Residual Land Value ($/SF Site Area) $18 $28 $42 $57 $36 % Change -5.4% -1.0% 6.4% 17.0% 7.8%
In-Lieu Fee @ $25/Net SF
Residual Land Value ($/SF Site Area) $15 $25 $37 $51 $32 % Change -18.0% -11.7% -7.3% 5.3% -4.5%
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KMA also analyzed the impact of the potential fee levels on the market-rate residential developer's profit, assuming that the base case land value is held constant. The results of this analysis are summarized in Table III-12.

Table III-12: Economic Impact of Potential In-Lieu Fee on Project Feasibility — Developer Profit - Citywide

FOR-SALE RENTAL
Garden Average
Apartments
Single-Family
Large Lot
Single-Family
Medium Lot Townhomes

Optimal Approach (On-Site vs. Off-Site Production) ,
Developer Profit (% of Value) 10.0%
Off-Site

10.0%
Off-Site

10.0%
Off-Site

10.0%
On-Site

10.0%
---

In-Lieu Fee @ $15/Net SF
Developer Profit (% of Value) 6.8% 6.9% 6.8% 6.8% 6.8%
% Change -3.2% -3.1% -3.2% -3.2% -3.2%
In-Lieu Fee @ $25/Net SF
Developer Profit (% of Value) 4.5% 4.8% 4.6% 4.7% 4.7%
% Change -5.5% -5.2% -5.4% -5.3% -5.3%
The results shown in Tables III-11 and III-12 demonstrate that potential in-lieu fee levels between $15 and $25 per SF for residential development projects Citywide will have relatively minor impacts on developers' financial pro formas, when compared to existing compliance methods of producing inclusionary units either on- or off-site.

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IV. IN-LIEU FEE FINANCIAL ANALYSIS: VILLAGE AND BARRIO MASTER PLAN AREA A. Residential Development Prototypes
Table IV-1 provides a summary of the residential development prototypes identified for the Village/Barrio in-lieu fee financial analysis. The Village/Barrio prototypes are illustrative of the types of development projects occurring and anticipated to occur in the Village/Barrio. Three new construction for-sale residential prototypes and one new construction rental residential prototype were identified based on discussion with City staff. While this level of feasibility analysis is useful for conceptual planning purposes, the actual circumstances for individual projects — physical, planning, market, financial, and other factors — will likely vary from the findings presented in this report.

Table IV-1: Project Descriptions for Development Prototypes — Village/Barrio

FOR-SALE RENTAL
Barrio Perimeter
Stacked Flats
over Tuck-under
Village General Village Center
Mixed-Use
Stacked Flats
Barrio Center

Stacked Flats
over Tuck-under

0.50 Acres
Zero Lot Line
Rowhomes
Site Area 0.50 Acres 0.50 Acres 0.50 Acres
Density (Units/Acre) 23.0 35.0 14.0 30.0
Number of Units 11 Units 17 Units 7 Units 15 Units
Unit Mix 1, 2 and 3
Bedrooms
1, 2, and 3
Bedrooms
2 and 3
Bedrooms
1 and 2
Bedrooms
Stories 3 Stories 4 Stories 3 Stories 3 Stories
Average Unit Size 1,209 SF 1,194 SF 1,429 SF 857 SF
Retail SF --- 3,000 SF --- --

B. Projected Market Sales Prices and Rent
KMA surveyed new for-sale and rental developments in the Village/Barrio. The purpose of the survey was to derive estimates of the currently achievable market prices and rental rates for the types of developments likely to be constructed in the Village/Barrio. The base case market-rate sales prices and monthly rent estimates that are used in the Village/Barrio financial feasibility analyses are presented in Table IV-2.

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RENTAL FOR-SALE
$2,933 $935,000 $914,000 $732,000 Average Market Price/ Monthly Rent
Table IV-2: Projected Market Sales Prices and Rents — Village/Barrio

Village General Village Center
Mixed-Use
Stacked Flats
$765/SF
Barrio Center Barrio Perimeter
Stacked Flats
over Tuck-under

Stacked Flats
Over Tuck-under
$773/SF
Zero Lot Line
Rowhonnes
Average $/SF $512/SF $3.42/SF
Average Unit Size 1,209 SF 1494 SF 1,429 SF 857 SF
Table IV-3: Affordable Sales Prices and Rents - Village/Barrio

FOR-SALE RENTAL
Village General Village Center Barrio Center Barrio Perimeter Stacked Flats Mixed-Use Zero Lot Line Stacked Flats
over Tuck-under Stacked Flats Rowhomes over Tuck-under
Average Affordable Sales Price
and Monthly Rent @ Low
Income

$316,000 $265,000 $384,000 $1,667

C. Affordable Price and Rent Calculation
The maximum affordable sales prices and rents for the income-restricted units in the Village/Barrio used the same standards, assumptions, and calculations described in Section III. The detailed calculations are presented in Appendix 6 and the resulting average affordable sales prices and rents for the Village/Barrio residential development prototypes are presented in Table IV-3.

D. Approach 1: Economic Impact of Incorporating Affordable Housing On-Site To estimate the economic impact of incorporating inclusionary housing requirements on-site, KMA prepared financial pro forma models for each Village/Barrio residential development prototype. The financial pro forma models present comparative impacts of: (a) a 100% market-rate residential development, as compared to (b) the City's current inclusionary housing requirement. Appendix 4, Attachments F through I, provide the detailed pro forma analyses for each Village/Barrio residential development prototype.

Each attachment displays a financial pro forma model estimating the residual land value for: (1) a base case consisting of a 100% market-rate development; and (2) a development that complies with the City's existing inclusionary requirement, i.e., 15% at Low Income. The base case residual land value outcome can then be measured against the residual land value that is generated when the 15% Low Income requirement is imposed. The economic impact of incorporating the City's existing inclusionary requirement on-site is summarized in Table IV-4.

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Village General
Stacked Flats
over Tuck-under
Village Center
Mixed-Use
Stacked Flats
Barrio Center
Zero Lot Line
Rowhomes
Barrio Perimeter
Stacked Flats
over Tuck-under
Average

FOR-SALE RENTAL
Residual Land Value Per Unit
Table IV-4: Economic Impact of Incorporating Affordable Housing On-Site — Village/Barrio 100% Market-Rate $297,000

$263,000

$167,000

$109,000

$209,000

85% Market-Rate / 15%
Low Income $187,000

$174,000

$122,000

$78,000

$140,000

Economic Impact of Incorporating Affordable Housing On-Site Per Market-Rate Unit $110,000 $89,000 $45,000 $31,000 $68,750 Per Market-Rate Net SF $90.98 $74.53 $31.50 $36.19 $58.30 As shown in Table IV-4, the economic impact of including 15% Low Income units on-site is estimated to range from $31,000 to $110,000 per unit, or $32 to $91 per SF of market-rate residential living area in the Village/Barrio.

E. Approach 2: Funding Level Required to Implement Inclusionary Housing Production in an Off-Site Location
KMA prepared estimates of the affordability gaps associated with developing affordable housing in an off-site location. The purpose of this financial analysis was to estimate the funding gap that would be required for either a market-rate residential developer or the City to create the targeted inclusionary housing production in a separate off-site location.

As detailed in Appendix 4, Attachment 1, the analysis assumed the affordable housing project to be rental apartments, in a stacked flat configuration over podium parking, consisting of 20 units on a 0.50- acre site. KMA estimated the development costs, operating budget, and anticipated funding sources for the off-site affordable housing development prototype. The KMA analysis assumed that the affordable development is financed with either 4% or 9% Tax Credits.

As shown in Table IV-5, the average affordability gap for the affordable units is estimated to average $198,000 per Low Income unit. These figures are calculated as the difference between total development costs and total funding sources.

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Table IV-5: Off-Site Affordable Units — Affordability Gap per Unit — Village/Barrio

4% Tax Credits 9% Tax Credits Average
Total Sources of Funds $262,000 $291,000 $276,000
(Less) Total Development Costs $490,000 $458,000 $474,000 Affordability Gap per Affordable Unit $228,000 $167,000 $198,000 Table IV-6: Estimate of Funding Gap for Off-Site Low-Income Units — Village/Barrio
Affordability Gap per Off-Site Low Income Unit

$198,000

Per Market-Rate Unit
@ 15% Inclusionary Set-Aside

$34,940
Table IV-7: Funding Level Required to Create Affordable Housing Off-Site — Village/Barrio

FOR-SALE RENTAL

Village General Village Center
Mixed-Use
Stacked Flats
$34,940
Barrio Center Barrio Perimeter
Stacked Flats
over Tuck-under
Average
Stacked Flats
over Tuck-under
$34,940
Zero Lot Line
Rowhomes
$34,940 Per Market-Rate Unit $34,940 $34,940
Per Market-Rate Net SF $28.90 $29.26 $24.46 $40.79 $30.85 As shown above, KMA estimates that a Low Income rental unit developed in the Village/Barrio has an estimated average financing gap of $198,000. In other words, for the market-rate developer or City to facilitate creation of off-site Low Income units in the Village/Barrio, it would need to contribute $198,000 per affordable rental unit. As shown in Table IV-6, under the City's existing inclusionary requirement, the required number of off-site Low Income units is calculated against the total number of market-rate units approved plus inclusionary units produced. This equates to $34,940 per market-rate unit developed (i.e., $198,000 85% x 15%).

This funding gap outcome can be expressed on both a per-unit basis and per-SF basis relative to the market-rate residential development. KMA estimates that the City would need to receive an in-lieu fee of $34,940 per market-rate unit, or a per-SF fee ranging between $24 and $41, depending on the market-rate prototype, or an average of $31 per SF living area, as shown in Table IV-7.

F. Range of Potential In-Lieu Fees
As summarized in Table IV-8, in view of Approaches 1 and 2 above, the City may wish to consider a Village/Barrio in-lieu fee of $34,940 per market-rate unit, or between $25 and $35 per SF of market-rate residential living area.

Keyser Marston Associates, Inc.

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Item #4 Page 68 of 181

Table IV-8: Potential Fee Levels — 15% Low Income — Village/Barrio

Approach to Setting Fee Levels Potential
Fee Levels Approach 1:

On-Site Production
Approach 2:

Off-Site Production
Per Market-Rate Unit
$31,000 - $110,000
Average: $68,750
$34,940 $34,940
Per Market-Rate Net SF
Residential
$32 - $91
Average: $58
$24 - $41
Average: $31
$25 - $35
G. Economic Impact of In-Lieu Fee Levels
The KMA analysis also estimated the economic impact of the potential fee levels on project feasibility.

For each residential prototype, KMA first compared the residual land value generated from incorporating affordable units on-site within a market-rate development vs. the funding level required for inclusionary housing production off-site. The approach that yielded the higher residual land value was deemed the "optimal approach" to inclusionary production that a developer would most likely choose.

KMA then compared the residual land value from the optimal approach to the residual land value generated when imposing a potential in-lieu fee of $25 to $35 per SF of market-rate residential living area. The difference in residual land value reflects the economic impact of the potential fee levels. The KMA findings are summarized in Table IV-9, below.

Table IV-9: Economic Impact of Potential In-Lieu Fee on Project Feasibility - Residual Land Value — 15% Income - Village/Barrio
Low
Village
General -- - ' Stacked Flats
1 over Tuck- ,‘ under

FOR-SALE
Village Center Barrio Center
RENTAL
Barrio
Perimeter
Stacked
Flats over
Tuck-under
Average
Mixed-Use
Stacked Flats
Zero Lot
Line
Rowhomes
Residual Land Value ($/SF Site Area)

Approach 1: On-Site Production $95 $136 $39 $53 $81
Approach 2: Off-Site Production $132 $178 $42 $51 $101

Optimal Approach (On-Site vs. Off-Site Production)
Residual Land Value ($/SF Site Area)
$132
Off-Site
$178
Off-Site
$42
Off-Site
$53
On-Site
$102
---

In-Lieu Fee @ $25/Net SF
Residual Land Value ($/SF Site Area) $135 $182 $42 $60 $105 % Change 1.9% 2.4% -0.6% 13.1% 3.3%
In-Lieu Fee @ $35/Net SF
Residual Land Value ($/SF Site Area) $129 $173 $38 $54 $98 % Change -2.8% -2.9% -11.4% 2.0%
1 -3.1%
Keyser Marston Associates, Inc.

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Item #4 Page 69 of 181

KMA also analyzed the impact of the potential fee levels on the market-rate residential developer's profit, assuming that the base case land value is held constant. The results of this analysis are summarized in Table IV-10.

Table IV-10: Economic Impact of Potential In-Lieu Fee on Project Feasibility — Developer Profit — 15% Income - Village/Barrio
Low

FOR-SALE
Village Village Center General Barrio Center
RENTAL
Barrio
Perimeter
Average Stacked Flats
i
over Tuck- I under
Mixed-Use
Stacked Flats
Zero Lot
Line
Rowhomes
Stacked
Flats over
Tuck-under

Optimal Approach (On-Site vs. Off-Site Production)
Developer Profit (% of Value) 12.0%
Off-Site

12.0%
Off-Site

10.0%
Off-Site

12.0%
On-Site

11.5%
---

In-Lieu Fee @ $25/Net SF
Developer Profit (% of Value) 8.8% 9.0% 5.1% 7.7% 7.7%
% Change -3.2% -3.0% -4.9% 4.3% -3.8%
In-Lieu Fee @ $35/Net SF
Developer Profit (% of Value) 7.5% 7.9% 3.2% 6.0% ' 6.1% % Change -4.5% -4.1% -6.8% -6.0% -5.4%
The results shown in Tables IV-9 and IV-10 demonstrate that potential in-lieu fee levels between $25 and $35 per SF for residential development projects in the Village/Barrio will have relatively minor impacts on developers' financial pro formas, when compared to existing compliance methods of producing inclusionary units either on- or off-site.

Keyser Marston Associates, Inc. Page 21
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V. LIMITING CONDITIONS

1. The analysis contained in this document is based, in part, on data from secondary sources such as state and local government, planning agencies, real estate brokers, and other third parties. While KMA believes that these sources are reliable, we cannot guarantee their accuracy.

2. The analysis assumes that neither the local nor national economy will experience a major recession.

If an unforeseen change occurs in the economy, the conclusions contained herein may no longer be valid.

3. The findings are based on economic rather than political considerations. Therefore, they should be construed neither as a representation nor opinion that government approvals for development can be secured.

4. Development opportunities are assumed to be achievable during the specified time frame. A change in development schedule requires that the conclusions contained herein be reviewed for validity.

5. The analysis, opinions, recommendations and conclusions of this document are KMA's informed judgment based on market and economic conditions as of the date of this report. Due to the volatility of market conditions and complex dynamics influencing the economic conditions of the building and development industry, conclusions and recommended actions contained herein should not be relied upon as sole input for final business decisions regarding current and future development and planning.

6. Any estimates of development costs, capitalization rates, income and/or expense projections are based on the best available project-specific data as well as the experiences of similar projects. They are not intended to be projections of the future for the specific project. No warranty or representation is made that any of the estimates or projections will actually materialize.

7. KMA is not advising or recommending any action be taken by City of Carlsbad with respect to any prospective, new or existing municipal financial products or issuance of municipal securities (including with respect to the structure, timing, terms and other similar matters concerning such financial products or issues).

8. KMA is not acting as a Municipal Advisor to the City of Carlsbad and does not assume any fiduciary duty hereunder, including, without limitation, a fiduciary duty to the City of Carlsbad pursuant to Section 1.513 of the Exchange Act with respect to the services provided hereunder and any information and material contained in KMA's work product.

Keyser Marston Associates, Inc.

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9. The City of Carlsbad shall discuss any such information and material contained in KMA's work product with any and all internal and/or external advisors and experts, including its own municipal advisors, that it deems appropriate before acting on the information and material.

Keyser Marston Associates, Inc.

April 12, 2021
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March 22, 2022

Item #4 Page 72 of 181

APPENDICES
Appendix 1 Exhibit 1 — Comparison of Affordable Housing Fees, San Diego County Appendix 2 Key Assumptions and Findings — 15% Low Income • Table 1 — Key Assumptions — Citywide
• Table 2 — Key Assumptions —Village and Barrio
• Table 3 — Summary of Development Scenarios and Residual Land Value — Citywide • Table 4 - Summary of Development Scenarios and Residual Land Value —Village and Barrio
• Table 5 — Estimate of Potential In-Lieu Fee — Approach 1: Economic Impact of Incorporating Affordable Housing On-Site — Citywide
• Table 6 — Estimate of Potential In-Lieu Fee — Approach 2: Funding Level Required for Inclusionary Housing Funding Production Off-Site — Citywide • Table 7 — Impact of Potential In-Lieu Fee - Citywide
• Table 8 — Estimate of Potential In-Lieu Fee —Approach 1: Economic Impact of Incorporating Affordable Housing On-Site — Village and Barrio • Table 9 — Estimate of Potential In-Lieu Fee — Approach 2: Funding Level Required for Inclusionary Housing Funding Production Off-Site —Village and Barrio • Table 10 — Impact of Potential In-Lieu Fee —Village and Barrio Appendix 3 In-Lieu Fee Financial Analysis — Citywide Prototypes • Attachment A — Single-Family Detached — Large Lot
• Attachment B— Single-Family Detached — Medium Lot
• Attachment C —Townhomes
• Attachment D — Garden Apartments
• Attachment E —Stacked Flats over Tuck-under Parking — 100% Affordable Appendix 4 In-Lieu Fee Financial Analysis - Village and Barrio Prototypes • Attachment F — Stacked Flats over Tuck-under Parking - Village • Attachment G — Mixed-Use Stacked Flats over Podium Parking - Village • Attachment H — Zero Lot Line Rowhomes — Barrio
• Attachment I — Stacked Flats over Tuck-under Parking - Barrio • Attachment 1— Stacked Flats over Podium Parking — 100% Affordable Keyser Marston Associates, Inc. Page 24
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Appendix 5 Viability of 20% Low Income Inclusionary Requirement • Table 1 — Key Assumptions — Citywide
• Table 2 — Key Assumptions —Village and Barrio
• Table 3 —Summary of Development Scenarios and Residual Land Value — Citywide • Table 4 - Summary of Development Scenarios and Residual Land Value —Village and Barrio
• Table 5 — Economic Impact of Increasing to 20% Inclusionary Requirement - Citywide • Table 6 — Economic Impact of Increasing to 20% Inclusionary Requirement —Village and Barrio
• Table 7 — Estimate of Potential In-Lieu Fee — Approach 1: Economic Impact of Incorporating Affordable Housing On-Site — Citywide
• Table 8 — Estimate of Potential In-Lieu Fee —Approach 2: Funding Level Required for Inclusionary Housing Funding Production Off-Site —Citywide • Table 9 — Impact of Potential In-Lieu Fee - Citywide
• Table 10 — Estimate of Potential In-Lieu Fee — Approach 1: Economic Impact of Incorporating Affordable Housing On-Site — Village and Barrio • Table 11 — Estimate of Potential In-Lieu Fee —Approach 2: Funding Level Required for Inclusionary Housing Funding Production Off-Site —Village and Barrio • -Table 12 — Impact of Potential In-Lieu Fee —Village and Barrio Appendix 6 Estimate of Affordable Sales Prices and Rents • Worksheet 1 — Estimate of Affordable Sales Prices — Large Lot • Worksheet 2 — Estimate of Affordable Sales Prices — Medium Lot • Worksheet 3 — Estimate of Affordable Sales Prices —Townhomes • Worksheet 4 — Estimate of Affordable Rents — Garden Apartments/Stacked Flats over Tuck-under Parking
• Worksheet 5 — Estimate of Affordable Rents - 100% Affordable • Worksheet 6 — Estimate of Affordable Sales Prices — Stacked Flats over Tuck-under Parking - Village
• Worksheet 7 — Estimate of Affordable Sales Prices — Mixed-Use Stacked Flats - Village
• Worksheet 8 — Estimate of Affordable Sales Prices — Rowhomes — Barrio Appendix 7 Residential Market Data
• Worksheet 9 — Survey of Comparable Land Sales — Citywide • Worksheet 10 — Survey of Comparable Land Sales —Village, Barrio, and Adjacent Areas
• Worksheet 11 —Single-Family Residential Home Sales — Citywide Keyser Marston Associates, Inc.

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• Worksheet 12 — Single-Family Residential Home Sales — Village, Barrio, and Adjacent Areas
• Worksheet 13 — Attached Residential Home Sales — Citywide • Worksheet 14— Attached Residential Home Sales — Village, Barrio, and Adjacent Areas
• Worksheet 15 —Survey of Comparable Apartment Complexes Keyser Marston Associates, Inc. Page 26
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APPENDIX 1
Exhibit 1 - Comparison of Affordable Housing Fees,
San Diego County
Inclusionary Housing In-Lieu Fee Update
City of Carlsbad
March 22, 2022 Item #4 Page 76 SW/

EXHIBIT 1

COMPARISON OF AFFORDABLE HOUSING FEES, SAN DIEGO COUNTY

AFFORDABLE HOUSING IN-LIEU FEE STUDY
CRY

Inclusionary Production Requirement

Affordable Housing Fee

Rental For-Sale Project Size
Threshold
% Affordable
Units Required
Fee Option Project Size Threshold Fee Type
Amount Per
Market-Rate Unit or
Market-Rate SF
Carlsbad Yes Yes 7 units 15% @ Low Income Yes available to projects up to 6 units
In-Lieu Fee $4,515/Unit
Chula Vista (1) Yes Yes 50 units 10%
(5% Low Income
5% Moderate Income)
Yes available to
projects of all sizes;
< 50 units exempt
In-Lieu Fee varies by project
Coronado Yes Yes 2 units Rental Yes
Yes
available to
projects of all sizes
available to
projects of all sizes
In-Lieu Fee
In-Lieu Fee
$7,000/Unit
$7,000/Unit
20% @ Low Income
For-Sale
20% @ Moderate Income
Del Mar Yes Yes 2 - 5 units
6 - 9 units
10 -19 units
20 -29 units
30i- units
.
1 rental unit @ Low Income
1 rental unit @ Low Income
20% rental units @ Low
Income (at least 1 unit @
Very Low Income)
20% rental units @ Low
Income (at least 1 unit @
Very Low Income and 1 unit
at Extremely Low Income)
20% rental units @ Low
Income (at least 2 units @
Very Low Income and 2 units
at Extremely Low Income)
Yes
None
None
None
None
available to
projects up to 5 units
None
None
None
None
In-Lieu Fee
None
None
None
None
$31.02/SF
.

None
None
None
None
Prepared by: Keyser Marston Associates, Inc.

Filename i:\Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag

f2.,) CITY OF CARLSBAD
N.) NJ
NJ
NJ
CD
NJ
181 JO LL aSed

EXHIBIT 1.

COMPARISON OF AFFORDABLE HOUSING FEES, SAN DIEGO COUNTY

E AFFORDABLE HOUSING IN-LIEU FEE STUDY
94 CITY OF CARLSBAD
..

City
'

Inclusiona y Production Requirement
% Affordable
Units Required

Affordable Housing Fee
Rental For-Sale Project Size
Threshold Fee Option Project Size Threshold Fee Type
Amount Per
Market-Rate Unit or
Market-Rate SF
Encinitas Yes Yes 7 units 10% @ Very Low Income
or 15% Low Income
Yes available to
projects up to 6 units and
fractional units
In-Lieu Fee varies by project
Escondido No
Requirement
No
Requirement
None None None None None None
Oceanside Yes Yes 3 units Rental Yes available to
projects of all sizes
.

In-Lieu Fee $8.82/SF
.
10% @ Low Income
For-Sale Yes available to
projects of all sizes
In-Lieu Fee $8.82/SF
10% @ Low or
Moderate Income
Poway Yes Yes 1 unit Rental Yes available to projects
of all sizes
available to projects
of all sizes
In-Lieu Fee $500/unit (3)
15% @ Very Low Income
For-Sale Yes In-Lieu Fee $500/unit (3)
15% @ Low Income or
20% @ Moderate Income
San Diego (2)
Outside FUA
Yes Yes 10 units Rental Yes available to projects of all sizes; <10 units exempt
In-Lieu Fee $25/SF
10% @ 60% AMI
For-Sale Yes available to projects of all sizes;
<10 units exempt
In-Lieu Fee $25/SF
10% @ 100% AMI or
15% @ 120% AMI
San Diego
Inside FUA Yes Yes 2 units 20% @ 65% AMI or less None None None None Prepared by: Keyser Marston Associates, Inc. Page 29
Filename Marlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag 'MT 40 8L aed

EXHIBIT 1

COMPARISON OF AFFORDABLE HOUSING FEES, SAN DIEGO COUNTY AFFORDABLE HOUSING 1N-LIEU FEE STUDY
f.EL4 CITY OF CARLSBAD

Inclusionarl Production Requirement Affordable Housing Fee

Rental For-Sale Project Size
Threshold
% Affordable
Units Required Fee Option Project Size Threshold Fee Type Amount Per
Market-Rate Unit or
Market-Rate SF
San Marcos No Yes, as
alternative to
paying fee
1 unit
Pay in-lieu fee unless opting
to produce inclusionary units
of 15% @ Target Households
(determined by City)
Yes available to projects of all sizes In-Lieu Fee $9,300/unit Solana Beach Yes Yes 5 units 15% @ Very Low or
Low Income
Yes available to all projects where
calculation of required
affordable units results in a
fractional unit less than 0.5
Impact Fee $25.28/SF
Vista No
Requirement
No
Requirement
None None None None None None
rD
4:t
-o
rp
"11) Excludes area of City west of 1-805 identified as "Area of Low/Moderate Income Concentration". oo(2) Applies to development located outside of the Future Urbanizing Area (FUA). New ordinance approved by City Council December 11, 2019, effective July 1, 2020. Inclusionary Housing Ordinance to be phased in over five (5) years.
(3) The base fee varies by zoning, with a maximum total of $500 per unit for all projects.

Prepared by: Keyser Marston Associates, Inc.

Filename c\CarIsbad_Prototypes Analysis_v6_15%;4/12/2021;lag

r;
NJ
.!`"

APPENDIX 2
Key Assumptions and Findings - 15% Low Income
Inclusionary Housing In-Lieu Fee Update
City of Carlsbad
March 22, 2022 Item #4 Page 80 &left

CITYWIDE
TABLE 1 85% MARKET-RATE / 15% @ LOW

KEY ASSUMPTIONS - CITYWIDE PROTOTYPES

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

0.)
A

CITYWIDE

100% MARKET-RATE 100% AFFORDABLE

I. PROJECT DESCRIPTION

Site Area
Density - Residential
Number of UnitS
Average Unit Size
Retail SF
Parking Ratio

10.00 Acres

3.2 Units/Acre
32 Units
3,203 SF
---

2.00 Spaces/Unit

5.00 Acres

6.0 Units/Acre
30 Units
2,200 SF
-

2.00 Spaces/Unit

3.00 Acres

15.0 Units/Acre
45 Units
1,580 SF
--

2.27 Spaces/Unit

5.00 Acres

25.0 Units/Acre
125 Units
991 SF
-

2.13 Spaces/Unit

2.00 Acres

30.0 Units/Acre
60 Units
885 SF
-

1.53 Spaces/Unit

IL DEVELOPMENT COSTS
Off-Site Improvements
On-Site Improvements
Parking
Shell Construction - Residential
Shell Construction - Retail
FF&E/Amenities
Architecture & Engineering
Permits and Fees - Residential
Permits and Fees - Retail
Total Development Costs - Excl. Land
$3 /5F Site
$8 /SF Site
---
$150 /SF GBA
-
$15,000 /Unit

7.0% of Directs
$45,000 /Unit
---
$293 /SF GSA
$3 /SF Site
$8 /SF Site
---
$160 /SF GSA
---
$10,000 /Unit

7.0% of Directs
$45,000 /Unit
---
S308 /SF GSA
$5 /SF Site
$10 /SF Site
---
$175 /SF GSA
--
$7,500 /Unit

7.0% of Directs
$24,000 /Unit
.._
$309 /SF GSA
$5 /SF Site
$10 /SF Site
-
$170 /SF GSA
---
$10,000 /Unit

7.0% of Directs
$17,000 /Unit
---
$294 /SF GSA
S5 /SF Site
$10 /SF Site
$15,000 /Space
$170 /SF GSA
•-

$2,500 /Unit

5.0% of Directs
$18,000 /Unit
---

$388 /SF GBA
III. MARKET-RATE SALES PRICES / RENTS
Studio
One Bedroom
Two Bedroom
Three Bedroom
Four Bedroom
Unit SF $/SF Sales Price Unit SF S/sF Sales Price Unit SF 1/2 Sales Price Unit SF S/ Mo. Rent Unit SF $/SF Mo. Rent --- - ---
- - ---
--- --- -
3,000 $450 $1,350,000
3,500 $425 $1,488,000
--- - ---
- --- -
--- --- ---
2,000 $500 $1,000,000
2,500 $450 $1,125,000
--- - -
- -- ---
1,400 $480 $672,000
1,700 $460 $782,000
- --- ---
--- - -
750 $3.00 $2,250
1,000 $2.75 $2,750
1,350 52.50 $3,380
- --- ---
- --- ---

750 $1.40 $1,050
950 $1.32 $1,256
1,100 $1.32 $1,449
--- --- ---

IV. RETAIL SPACE

Retail
Retail Cap Rate
--
- _.
-
---
-
-
-
---
-
•
V. RESIDUAL LAND VALUE
Cost of Sale
Target Developer Profit
1 Residual Land Value
1 Per Unit > ,. Per SF Site Area l'

3.0% of Value

10.0% of Value -...- _
$9,117,000
$285,000
$21

3.0% of Value

10.0% _ of Value .-

$7,103,000
$237,000
$33

3.0% of Value

10.0% of Value
$6,609,000
$147,000
$51
---
$14,216,000
$124,000
$65
-
---
---

-
--

i VI. FINANCING GAP
_ Financing Gap
c Per Unit
---
- -
-
-
--
-
($10,620,000) 01
077,000
(1) Refiects affordabilitY gap per affordable unit, inclusive of land acquIsitIOn costs.

Prepared by: Keyser Marston Assnciates, Page 32
FlIelame ACarlsbaC_Prototypes Analyslky5_15%;4/12/7021;lag

VILLAGE AND BARRIO
TABLE 2 85% MARKET-RATE / 15% @ LOW

KEY ASSUMPTIONS - VILLAGE AND BARRIO PROTOTYPES

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

VILLAGE AND BARRIO
..) VHlegeStpdcefla n

Thck.ii OF Villa MIX Us vet urn Barrio Rowhomes rn St cke Fl ts v r Tuck us r Stacked Fiats over Podium I. PROJECT DESCRIPTION

Site Area
Density - Residential
Number of Unit5
Average Unit Size
Retail SF
Parking Ratio

0.50 Acres

23.0 Units/Acre
11 Units
1 ,209 SF
---

1.82 Spaces/Unit

0.50 Acres

35.0 Units/Acre
17 Units
1,194 SF
3,000 SF

1.76 Spaces/Unit

0.50 Acres

14.0 Units/Acre
7 Units
1,429 SF
-

2.29 Spaces/Unit

0.50 Acres

30.0 Units/Acre
15 Units
857 SF
-
LBO Spaces/Unit

0.50 Acres

40.0 Units/Acre
20 Units
605 SF
-

1.15 Spaces/Unit
II. DEVELOPMENT COSTS

Off-Site Improvements
On-Site Improvements
Parking
Shell Construction - Residential
Shell Construction - Retail
FF&E/Amenities
Architecture & Engineering
Permits and Fees - Residential
Permits and Fees - Retail
Total Development Costs - Excl. Land

$0 /SF Site
$15 /SF Site
$15,000 /Space
$190 /SF GSA
---
$7,500 /Unit

5.0% of Directs
$18,000 /Unit
---
5360 /SF GSA

$0 /SF Site
$15 /SF Site
$30,000 /Space
$200 /SF GSA
$150 /SF GBA-Retail
$7,500 /Unit

5.0% of Directs
$18,000 /Unit
$11 /SF GSA-Retail
$377 /SF GSA

$0 /SF Site
$ 10 /SF Site
-
$195 /SF GSA
---
$7,500 /Unit

5.0% of Directs
$24,000 /Unit
--
$329 /SF GSA

$0 /SF Site
$10 /SF Site
$15,000 /Space
$185 /SF GBA
-
$5,000 /Unit

5.0% of Directs
$3.8,000 /Unit
-
$325 /SF GSA
50 /SF Site
$15 /SF Site
$30,000 /Space
$180 /SF GSA
---
$3,500 /Unit

5.0% of Directs
$18,000 /Unit
-
$478 /SF GBA
III. MARKET-RATE SALES PRICES / RENTS

Studio
One Bedroom
Two Bedroom
Three Bedroom
Four Bedroom
Unit SF $/SF Sales Price Unit SF $/SF Sales Price UnR SF 5/SF Sales Price Unit SF Mo. Rent Unit SF S/SF Mo. Rent -
950
1,200
1,500
---
- -
$800 $760,000
$775 $930,000
$750 $1,125,000
--- ---
-
950
1,200
1,500
---
-" -
$785 $746,000
5765 $918,000
$750 $1,125,000
-- ---
-
---
1,250
1,500
---
--- ---
-•- -
$550 $688,000
$500 $750,000
- -
---
750
950
---
---
--- ---
$3.60 52,700
$3.30 $3,140
--- -•- 995
- -
450 $2.19 $985
550 $1.91 $1,050
750 $1.67 $1,256
$1.46 $1,449
- -- ---
,-* IV. RETAIL SPACE

CD
3 Retail Rent
4* Retail Cap Rate

--- -
---
$3.50

6.5%

--
- -
V. RESIDUAL LAND VALUE

Cost of Sale
Target Developer Profit
-C Residual Land Value oi
ro Per Unit ro
oc Per SF Site Area

3.0% of Value
12,0% of Value
$3,269,000
$297,000
$150

3.0% of Value

12.0% of Value
$4,477,000
$263,000
$206

3.0% of Value

10.0% of Value
$167,000
$54
..........
-
--. ......
$109,000
Ps
---
- -----

--
---
is-

o VI. FINANCING GAP

1- Financing Gap
Cc Per Unit 1--.

---
-

---
---

--
--

-
---
($3,860,000) (a
($198,000)
(I) ReLects affnrciability gap per affordable unit, inclusive of land acquisition costs.

Prepared by: Keyser Marston Associates, Inc. Page 33
Flenarne liWarlsbad2rototypes Analysis_v6_15%;4/12/2021;/ag

100% Market-Rate and Mixed-Income 100% Affordable

RENTAL FOR-SALE

10.00 Acres

3.2 Units/Acre
32 Units
2 Stories

5.00 Acres

6.0 Units/Acre
30 Units
2 Stories
Townhomes

3.00 Acres

15.0 Units/Acre
45 Units
2 Stories
100% @ Market-Rate
$147,000/Unit $51/SF
85% @ Market-Rate
15% @ Affordable 11)12)
$92,000/Unit $32/SF

5.00 Acres

25.0 Units/Acre
125 Units
3 Stories
Garden
Apartments
100% @ Ma ket-Rate
$114,000/Unit $65/SF
Single-Family Detached
Large Lot
Single-Family Detached
Medium Lot
85% @ Market-Rate
15% @ Affordable (1)(2)
$145,000/Unit $20/SF
85% @ Market-Rate
15% @ Affordable cnr3)
$84,000/Unit $48/SF
100% @ Market-Rate
5285,000/Unit 521/SF
85% @ Market-Rate
15% @ Affordable (n12)
$150,000/Unit $11/SF
100% @ Market-Rate
$237,000/Unit $33/SF
Stacked Flats over
Tuck-under Parking

2.00 Acres

30.0 Units/Acre
60 Units
3 Stories
100% Affordable
w/4% Tax Credits (.0
($177,000)/Unit ($122)/SF

CITYWIDE
TABLE 3 85% MARKET-RATE / 15% @ LOW

SUMMARY OF DEVELOPMENT SCENARIOS AND RESIDUAL LAND VALUE - CITYWIDE

K INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
o.) CITY OF CARLSBAD

CITYWIDE
-c3
cu
tra CD
CO
—h
CO
I-1 (1) Affordability not to exceed 80% Area Median Income (AMI). (2) Assumes maximum ownership payment at 30% of 80% AMI, adjusted for family size. (3) Assumes maximum rental payment at 30% of 70% AMI, adjusted for family size. (4) Reflects affordability gap per affordable unit, inclusive of land acquisition costs.

Prepared by: Keyser Marston Associates, Inc.

Filename: \ Carlsbad_Prototypes Analysis_y6_15%;4/12/2021;lag

—5 r-)
NJ
.t.sj
NJ
NJ
NJ

Village General

0.50 Acres

23.0 Units/Acre
11 Units
3 Stories
100% @ Market-Rate
5297,000/Unit $150/5F
85% @ Market-Rate
15% @ Affordable (2)13)
5187,000/Unit $95/5F
Village Center
Mixed-Use
Stacked Flats over
Podium Parking

0.50 Acres

35.0 Units/Acre
17 Units
4 Stories
100% @ Market-Rate
$283,000/Unit 5206/SF
85% @ Market-Rate
15% @ Affordable (7)(3)
$174,000/Unit $136/5F
Barrio Perimeter
Stacked Flats over
Tuck-under Parking

0.50 Acres

30.0 Units/Acre
15 Units
3 Stories
100% 0 Market-Rate
5108,000/Unit $75/5F
85% @ Market-Rate
15% @ Affordable (7)(4)
578,000/Ora $53/SF
Village / Barrio
Stacked Flats over
Podium Parking (1)

0.50 Acres

40.0 Units/Acre
20 Units
3 Stories
100% Affordable
w/ Tax Credits (s)
($198,000)/Unit ($182)/SF

VILLAGE AND BARRIO
85% MARKET-RATE / 15% 0 LOW
TABLE 4

SUMMARY OF DEVELOPMENT SCENARIOS AND RESIDUAL LAND VALUE - VILLAGE AND BARRIO

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE (-)
= - CITY OF CARLSBAD

VILLAGE AND BARRIO

RENTAL

FOR-SALE

100% Market-Rate / Mixed-Income 100% Affordable
Barrio Center
Zero Lot Line
Rowhomes

0.50 Acres

15.0 Units/Acre
7 Units
3 Stories
100% @ Market-Rate
5187,000/Unit $5:i/SF
85% @ Market-Rate
15% @ Affordable (2)(31
$122,000/Unit $39/5F
CD
00 Assumes development will qualify for an affordable housing density bonus. 00(2) Affordability not to exceed 80% Area Median Income (AMI).

Assumes maximum ownership payment at 30% of 80% AMI, adjusted for family size. (4) Assumes maximum rental payment at 30% of 70% AMI, adjusted for family size. (5) Reflects average affordability gap per affordable unit for two alternative financing approaches (4% Tax Credits and 9% Tax Credits).

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag

% Change
($78,000) -39.8%
($37.26)
($14.69)

CITYWIDE
85% MARKET-RATE / 15% @ LOW
TABLE 5

0.) ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 1: ECONOMIC IMPACT OF INCORPORATING AFFORDABLE HOUSING ON-SITE - CITYWIDE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
A rs..) CITYWIDE

FOR-SALE RENTAL

30,000
$285,000
Single-Family Detached
Medium Lot Townhotnes Garden Apartments
I. Residual Land Value
A. 100% Market-Rate
Per Unit $237,000 $147,000 $114,000
B. 85% Market-Rate / 15% Low
Per Unit $150,000 $145,000 $92,000 $84,000
II. Economic Impact of Incorporating
Affordable Housing On-Site
Per Market-Rate Unit
Per Market-Rate Net SF
Per SF Site Area
% Change % Change % Change % Change
($135,000) -47.4%
($42.15)
($9.92)
($92,000) -38.8%
($41.82)
($12.67)
($55,000) -37.4%
($34.81)
($18.94)
($30,000) -26.3%
($30.27)
($17.22)
CD
3 4t
Prepared by: Keyser Marston Associates, Inc.

Filename i:\Carlsbad_Prototypes Analysis_y6_15%;4/12/2021;lag I8 I l o S8 aed

III. Economic Impact of Inclusionary Housing
Production Off-Site 3.4 Change % Change % Chuna.2 % Change A. Residual Land Value - 100% Market-Rate $285,000

$237,000

$147,000

$114,000

B. Residual Land Value less Affordability Gap $253,760

$205,760

$115,760

$82,760

Per 5F Site Area $18.64

$28.34

$39.86

$47.50

...... .

C. Economic Impact of Off-Site Inclusionary Housing

Per Market-Rate Unit ($31,240) -11.0% ($31,240) -13.2% ($31,240) -21.3% ($31,240) -27.4% Per Market-Rate Net SF ($9.75)

($14.20)

($19.77)

($31.52)

Per SF Site Area ($2.29)

($4.30)

($10.76)

($17.93)

CD
3 FOR-SALE RENTAL

Single-Family Detached
Large Lot
Single-Family Detached
Medium Lot
Townhomes Garden Apartments
I. Affordability Gap

A. Residual Land Value per Affordable Unit (1) ($77,000) ($77,000) ($77,000) ($77,000) B. Acquisition Costs (2) ($100,000) ($100,000) ($100,000) ($100,000) C. Affordability Gap per Affordable Unit ($177,000) ($177,000) ($177,000) ($177,000) II. Funding Level Required for Inclusionary Housing

Production Off-Site
Affordability Gap per Market-Rate Unit @ 15% Low 131 ($31,240) ($31,240) ($31,240) ($31,240) Average
($77,000)
($100,000)
($177,000)
($31,240)
% Change
$196,000
$165,000
$38.21
($31,240) -15.9%
($18.81)
($8.82)

CITYWIDE
85% MARKET-RATE / 15% @ LOW
TABLE 6
ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 2: FUNDING LEVEL REQUIRED FOR INCLUSIONARY HOUSING PRODUCTION OFF-SITE - CITYWIDE a)

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
n - CITY OF CARLSBAD
NJ
NJ
NJ
NJ

o (1) Residual land value for 100% affordable stacked flats over tuck-under parking; see Attachment E. "N2) KMA estimate based on recent experience in North County coastal areas.

I"(3) Assumes inclusionary requirement applied to total number of market-rate units approved (he., (gap ÷ 85%) x 15%1 00 Prepared by: Keyser Marston Associates, Inc. Page 37
Filename i:\Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag a)
cro (I)
oo
cn

rj
D.)
Potential In-Lieu Fee: $15 - $25/Net SF
TYWIDE Cl

FOR-SALE RENTAL
A
15% LOW
Average
$118,000
$28
$165,000
$34
$34

10.0%
$404
% Change
$36 7.8%

6.8% -3.2%

3.7%
%_SLIpig_te
$32 -4.5%

4.7% -5.3%

6.2%
I. Optimal Approach: On-Site vs. Off-Site
Production
A. Residual Land Value ($/SF Site Area)
B. Developer Profit (% of Value)
C. Total Development Costs - Per Net SF 0.)
$19
Off-Site

10.0%
$382

$28
Off-Site

10.0%
$415

$40
Off-Site

10.0%
$406

$48
On-Site

10.0%
$411

II. In-Lieu Fee @ $15/Net SF
A. Residual Land Value - Per SF Site Area $18
% Change
$28
%Change '
$42
% Ch6oi - e
$57
% Change

-1.0% 6 ,1% 17,0%.
• B. Developer Profit (% of Value) 6.8% -3.2% 6.9% -3,1%. 6.8% -4.2% 6.8% -3:2% C. In-Lieu Fee as % of Development Costs 3.9%

3.6%

3.7%

3.6%

III. In-Lieu Fee @ $25/Net SF

% Change

% Change

% Chma:

%Change
A. Residual Land Value - Per SF Site Area $15 -18.0% $25 -11.7% $37 -7.3% $51 5.3% B. Developer Profit W. of Value) 4.5% -SS% 4.8% -5.2% 4.6% -5.4% 4.7% -5.3% C. In-Lieu Fee as % of Development Costs 6.5%

6.0%

6.2%

6.1%

CD
3 Large Lot Townhomes Garden Apartments Single-Family Detached Single-Family Detached Medium Lot
Approach 1: Economic Impact of Incorporating Affordable Housing On-Site Residual Land Value

Per Unit $150,000 $145,000 $92,000 $84,000
Per SF Site Area $11 $20 $32 $48
Approach 2: Funding Level Required for Inclusionary Housing Production Off-Site $205,760 $115,760 $82,760
Residual Land Value
Per Unit $253,760
Per SF Site Area $19 $28 $40 $47

CITYWIDE
TABLE 7 85% MARKET-RATE / 15% @ LOW

IMPACT OF POTENTIAL IN-LIEU FEE ON PROJECT FEASIBILITY - CITYWIDE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
cu CITY OF CARLSBAD
(1) Reflects total developments costs inclusive of residual land value.

Prepared by: Keyser Marston Associates, Inc.

Filename: \ Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag

%Change
($68,750) -32.9%
($58.30)
($40.21)
Village General Village Center
Stacked Flats over
Tuck-under Parking
Mixed-Use Stacked Flats
over Podium Parking
$297,000 $263,000 $109,000
$78,000
%Change
($31,000) -28.4%
($36.19)
($21.35)

VILLAGE AND BARRIO
85% MARKET-RATE / 15% @ LOW
TABLE 8
ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 1: ECONOMIC IMPACT OF INCORPORATING AFFORDABLE HOUSING ON-SITE - VILLAGE AND BARRIO

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
7- CITY OF CARLSBAD
NJ
N->
0 NJ
NJ

FOR-SALE RENTAL
I. Residual Land Value
A. 100% Market-Rate
Per Unit
B. 85% Market-Rate / 15% Low
Per Unit
Economic Impact of Incorporating
Affordable Housing On-Site
Per Market-Rate Unit
Per Market-Rate Net SF
Per SF Site Area
$187,000
%Change
($110,000) -37.0%
($90.98)
($55.56)
$174,000
%Change
($89,000) -33.8%
($74.53)
($69.47)
Barrio Center
Zero Lot Line
Rowhomes
$167,000
$122,000
%Change
($45,000) -26.9%
($31.50)
($14.46)
Barrio Perimeter
Stacked Flats over •
Tuck-under Parking 4
T2T / 0 22 D2ed
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Filename i:\Carlsbad_Prototypes Ana lysis_v6_15%;4/12/2021;lag Page 39

III. Economic Impact of Inclusionary. Housing
Production Off-Site % Change %Ci_m _Ag_le

% Change %.._ Change
A. Residual Land Value - 100% Market-Rate $297,000

$263,000 $167,000

$109,000

B. Residual Land Value less Affordability Gap $262,060

$228,060

$132,060

$74,060

Per SF Site Area $132.35

$178.01

$42.44

$51.01

_ .......... _____ ....... ___. __ ......... ______

........ _.

C. Economic Impact of Off-Site Inclusionary Housing

Per Market-Rate Unit ($34,940) -11.8% ($34,940) -13.3% ($34,940) -20.9% ($34,940) -32.1%

Per Market-Rate Net SF ($28.90)

($29.26)

($24.46)

($40.79)

Per SF Site Area ($17.65)

($27.27)

($11.23)

($24.06)

3 VILLAGE AND BARRIO
85% MARKET-RATE / 15% @ LOW
TABLE 9
ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 2: FUNDING LEVEL REQUIRED FOR INCLUSIONARY HOUSING PRODUCTION OFF-SITE - VILLAGE AND BARRIO

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
=CITY OF CARLSBAD
a

NJ VILLAGE AND BARRIO

FOR-SALE RENTAL

Village General Village Center Barrio Center Barrio Perimeter Stacked Flats over
Tuck-under Parking
Average Stackedliats ovet;
Tuck-under Parking
Mixed-Use Stacked Flats
over Podium Parking
Zero Lot Line
Rowhomes
I. Affordability Gap

A. Residual Land Value per Affordable Unit qi ($48,000) ($48,000) ($48,000) ($48,000) ($48,000) B. Acquisition Costs12) ($150,000) ($150,000) ($150,000) ($150,000) ($150,000) C. Affordability Gap per Affordable Unit ($198,000) ($198,000) ($198,000) ($198,000) ($198,000) II. Funding Level Required for Inclusionary Housing

Production Off-Site
Affordability Gap per Market-Rate Unit @ 15% Low131 ($34,940) ($34,940) ($34,940) ($34,940) ($34,940) % Change
$209,000
$174,000
$101
......... ...... —
($34,940) -16.7%
($30.85)
($20.05)
-o 0,)
Crci CD
co
O
tC#
(1) Reflects average residual land value for two alternative financing approaches (4% Tax Credits and 9% Tax Credits). Assumes development of 100% affordable stacked flats over podium parking; see Attachment1. —4(2) KMA estimate based on recent experience in North County coastal areas. 00(3) Assumes inclusionary requirement applied to total number of market-rate units approved [i.e., (gap ÷ 85%) x 15%).

Prepared by: Keyser Marston Associates, Inc.

Filename i:Warlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag

Potential In-Lieu Fee: $25 - $35/Net SF

VILLAGE AND BARRIO

15% LOW

FOR-SALE

RENTAL

': • 'StAciced flatteker
.ilickAmtley;.P5Olng

N.)
NI
0 N.J
ts-)
Average
$140,000
$81
$174,000
$101
$102

11.5%
$581
% Change
$105 3.3%

7.7% -3.8%

4.1%
% Change
$98 -3.1%

6.1% -5.4%

5.8%
Approach 1: Economic Impact of Incorporating Affordable Housing On-Site Residual Land Value

Per Unit $187,000 $174,000 $122,000 $78,000
Per SF Site Area $95 $136 $39 $53
Approach 2: Funding Level Required for Inclusionary Housing Production Off-Site $228,060 $132,060 $74,060
Residual Land Value
Per Unit $262,060
Per SF Site Area $132 $178 $42 $51

VILLAGE AND BARRIO
TABLE 10 85% MARKET-RATE / 15% @ LOW

IMPACT OF POTENTIAL IN-LIEU FEE ON PROJECT FEASIBILITY - VILLAGE AND BARRIO

EINCLUSIONARY HOUSING IN-LIEU FEE UPDATE
a) CITY OF CARLSBAD
I. Optimal Approach: On-Site vs. Off-Site
Production
A. Residual Land Value - Per SF Land
B. Developer Profit (% of Value)
C. Total Development Costs - Per Net SF (3.)
$132
Off-Site

12.0%
$657
$178
Off-Site

12.0%
$720
$42
Off-Site

10.0%
$446
$53
On-Site

12.0%
$499
II. In-Lieu Fee @ $25/Net SF % Change % Change % Change %Ct_cg_ le A. Residual Land Value - Per SF Land $135 1.9% $182 2.4% $42 -0.6% $60 13.1% B. Developer Profit (% of Value) 8.8% -3.2% 9.0% -3.0% 5.1% -4.9% 7.7% -4.3% C. In-Lieu Fee as % of Development Costs 3.8% 3.5% 5.6% 5.0% III. In-Lieu Fee @ $35/Net SF % Change %CtqI n e % Change % Change , A. Residual Land Value - Per SF Land $129 -2.8% $173 -2.9% $38 -11.4% $54 2.0% B. Developer Profit (% of Value) 7.5% -4.5% 7.9% -4.1% 3.2% -6.8% 6.0% -6.0% C. In-Lieu Fee as % of Development Costs 5.3% 4.9% 7.8% 7.0% (1) Reflects total developments costs inclusive of residual land value.

Prepared by: Keyser Marston Associates, Inc.

Filename: \ Ca rlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag Page 41

APPENDIX 3
In-Lieu Fee Financial Analysis
Citywide
Inclusionary Housing In-Lieu Fee Update
City of Carlsbad
March 22, 2022 Item #4 Page 91 &feel

CITYWIDE - FOR-SALE

SINGLE-FAMILY DETACHED - LARGE LOT
TABLE A-1

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Single-Family - Large Lot
I.

II.

Site Area
Gross Building Area

10.00 Acres

Residential Area 102,500 SF 100%

Common Area 0 SF 0%

Total Gross Building Area (GBA) 102,500 SF 100%

III. Unit Mix # of Units Unit Size

One Bedroom 0 Units 0%

Two Bedroom 0 Units 0%

Three Bedroom 19 Units 59% 3,000 SF

Four Bedroom 13 Units 41% 3 500 SF

Total 32 Units 100% 3,203 SF
IV. Number of Stories 2 Stories

V. Density 3.2 Units/Acre

VI. Approximate Lot Size 10,900 SF/Lot

VII. Construction Type Type V (Wood)

VIII. Parking

Parking Type Attached Garages

Number of Spaces 2.0 Spaces/Unit 64 Spaces

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Filen hia riNtia22b2c0Nototypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 92 8f0811

CITYWIDE - FOR-SALE

SINGLE-FAMILY DETACHED - LARGE LOT
TABLE A-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Single-Family - Large Lot
Direct Costs {' )
Total Per Unit Comments

Off-Site Improvements 121 $1,089,000 $34,000 $2.50 Per SF Site On-Site Improvements/Landscaping (2) $3,267,000 $102,100 $7.50 Per SF Site Parking $0 $0 Included Below
Shell Construction - Residential $15,375,000 $480,500 $150 Per SF GBA - Residential FF&E/Amenities $480,000 $15,000 Allowance
Contingency $1,011,000 $31,600 5.0% of Directs
Total Direct Costs $21,222,000 $663,200 $207 Per SF GBA II. Indirect Costs

Architecture & Engineering $1,486,000 $46,400 7.0% of Directs Permits & Fees - Residential (3) $1,440,000 $45,000 $14 Per SF GBA Community Facilities District No. 1 (Citywide) (4) $183,000 $5,700 $2 Per SF GBA Legal & Accounting $212,000 $6,600 1.0% of Directs
Taxes & Insurance $1,350,000 $42,200 3.0% of Market Value Developer Fee $849,000 $26,500 4.0% of Directs
Marketing/Sales $1,350,000 $42,200 3.0% of Market Value Contingency $344,000 $10,800 5.0% of lndirects
Total Indirect Costs $7,214,000 $225,400 34.0% of Directs III. Financing Costs (5) $1,592,000 $49,800 7.5% of Directs IV. Total Development Costs (') $30,028,000 $938,400 $293 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. (3) Based on Building Industry Association (BIA) of San Diego County 2020 Fee Survey. Includes, school, water/sewer, public facilities and traffic development impact fees, plan check, building permit, inspections, and other processing fees. (4) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(5) Includes loan fees, interest during construction, and interest during sales. (6) Excludes acquisition costs.

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Filenrs,l2c2pes Analysis_v6_15%;4/12/2021;ema Item #4 Page 93 SO

CITYWIDE - FOR-SALE

SINGLE-FAMILY DETACHED - LARGE LOT
TABLE A-3
ZZOZ 'ZZ LIDJetAl

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

Single-Family - Large Lot

100% @ Market-Rate
I. Gross Sales Proceeds
85% @ Market-Rate I 15% @ Low
A. Market-Rate
Unit Size # Units 5/SF

Three Bedroom 3,000 SF 19 $450 $1,350,000
Four Bedroom 3 500 SF 13 $42$ $1,488,000
Subtotal/Average 3,203 SF 32 $439 $1,406,000
B. Affordable w

Three Bedroom 3,000 SF 0 $0 $0
Four Bedroom 3 500 SF 0 $i)

Subtotal/Average 3,203 SF 0 $0 $0
C. Total/Average 3,203 SF 32 $439 $1,406,000
# Units S/SF Price/Unit
16 $450 $1,350,000 $21,600,000
11 $425 $1,488,000 $16,368,000
27 $439 $1,406,000 $37,968,000
3 $131 $393,000 $1,179,000
2 $128 $447,000 $894,000
5 $130 $415,000 $2,073,000
32 $391 $1,251,000 $40,041,000
Total Total
$25,650,000
$19,344,000
$44,994,000
$0
$0
$44,994,000
II. Total Gross Sales Proceeds
(Less) Cost of Sale
(Less) Target Developer Profit
III. Total Net Sales Proceeds
42t (Less) Development Costs

3.0% of Value

10.0% of Value
$44,994,000
($1,350,000)
($4,499,000)
$39,145,000
($30,028,000)

3.0% of Value

10.0% of Value
$40,041,000
($1,201,000)
($4,004,000)
$34,836,000
($30,028,000)
$4,808,000
$150,000
$11
IV. Residual Land Value $9,117,000
Per Unit $285,000
Per SF Site $21
181 JO t76 aged
(1) Source: City of Carlsbad 2020 household income limits. Assumes maximum ownership housing payment at 30% of 80% Area Median Income (AMI); see Worksheet 2.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_y6_15%;4/12/2021;ema Page 45

CITYWIDE - FOR-SALE
S1NGLE-FAMILY DETACHED - MEDIUM LOT
TABLE B-1

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Single Family - Medium Lot
I.

II.

Site Area
Gross Building Area

5.00 Acres

Residential Area 66,000 SF 100%

Common Area 0 SF 0%

Total Gross Building Area (GBA) 66,000 SF 100%

III. Unit Mix # of Units Unit Size

One Bedroom 0 Units 0% -

Two Bedroom 0 Units 0% -

Three Bedroom 18 Units 60% 2,000 SF

Four Bedroom 12 Units 40% 2 500 SF

Total 30 Units 100% 2,200 SF
IV. Number of Stories 2 Stories

V. Density 6.0 Units/Acre

VI. Approximate Lot Size 5,800 SF/Lot

VII. Construction Type Type V (Wood)

VIII. Parking

Parking Type Attached Garages

Number of Spaces 2.0 Spaces/Unit 60 Spaces

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CITYWIDE - FOR-SALE

SINGLE-FAMILY DETACHED - MEDIUM LOT
TABLE B-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Single Family - Medium Lot
Direct Costs (1)
Total Per Unit Comments

Off-Site Improvements (2) $653,000 $21,800 $3 Per SF Site On-Site Improvements/Landscaping 121 $1,742,000 $58,100 $8 Per SF Site Parking $o $0 Included Below
Shell Construction - Residential $10,560,000 $352,000 $160 Per SF GBA - Residential FF&E/Amenities $300,000 $10,000 Allowance
Contingency $663,000 $22,100 5.0% of Directs
Total Direct Costs $13,918,000 $463,900 $211 Per SF GBA II. Indirect Costs

Architecture & Engineering $974,000 $32,500 7.0% of Directs Permits & Fees - Residential 131 $1,350,000 $45,000 $20 Per SF GBA Community Facilities District No. 1 (Citywide) 141 $106,000 $3,500 $2 Per SF GBA Legal & Accounting $209,000 $7,000 1.5% of Directs
Taxes & Insurance $945,000 $31,500 3.0% of Market Value Developer Fee $557,000 $18,600 4.0% of Directs
Marketing/Sales $945,000 $31,500 3.0% of Market Value
Contingency $254,000 $8,500 5.0% of Indirects
Total Indirect Costs $5,340,000 $178,000 38.4% of Directs III. Financing Costs (5) $1,044,000 $34,800 7.5% of Directs IV. Total Development Costs (5) $20,302,000 $676,700 $308 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. (3) Based on Building Industry Association (BIA) of San Diego County 2020 Fee Survey. Includes, school, water/sewer, public facilities and traffic development impact fees, plan check, building permit, inspections, and other processing fees. (4) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(5) Includes loan fees, interest during construction, and interest during sales. (6) Excludes acquisition costs.

Prepared by: Keyser Marston Associates, Inc.

FilenJ} Molypes Analysis_v6_15%;4/12/2021;ema Item #4 Page 96 efe81

ZZOZ `ZZ LI3JelAl
TABLE B-3

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Single Family - Medium Lot

CITYWIDE - FOR-SALE

SINGLE-FAMILY DETACHED - MEDIUM LOT
100% @ Market-Rate
I. Gross Sales Proceeds
85% @ Market-Rate / 15% @ Low
A. Market-Rate
Three Bedroom
Four Bedroom
Subtotal/Average
B. Affordable w
Three Bedroom
Four Bedroom
Subtotal/Average
C. Total/Average
2,000 SF 18 $500 $1,000,000
2 500 SF 12 $450 $1,125,000
2,200 SF 30 $477 $1,050,000
2,000 SF 0 $0 $0
2 500 SF 0 IQ 12
2,200 SF 0 $0 $0
$18,000,000
$13,500,000
$31,500,000
$o
$o
2,200 SF 30 $477 $1,050,000 $31,500,000
II. Total Gross Sales Proceeds
(Less) Cost of Sale
(Less) Target Developer Profit
III. Total Net Sales Proceeds
(Less) Development Costs

3.0% of Value

10.0% of Value
$31,500,000
($945,000)
($3,150,000)
$27,405,000
($20,302,000)

3.0% of Value

10.0% of Value
$28,323,000
($850,000)
($2,832,000)
$24,641,000
($20,302,000)
IV. Residual Land Value
Per Unit
Per SF Site
(1) Source: City of Carlsbad 2020 household income limits. Assumes maximum ownership housing payment at 30% of 80% Area Median Income (AM!); see Worksheet 3.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;ema I n 40 L6 aed

# Units $/sF Price/Unit Unit Size # Units 2H
15 $500 $1,000,000 $15,000,000
10 $450 $1,125,000 $11,250,000
25 $477 $1,050,000 $26,250,000
3 $197 $393,000 $1,179,000
2 $179 $447,000 $894,000
5 $189 $415,000 $2,073,000
30 $429 $944,000 $28,323,000
Total Total

CITYWIDE - FOR-SALE

TOWNHOMES
TABLE C-1

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
I.

II.

Site Area
Gross Building Area

3.00 Acres

Residential Area 71,100 SF 99%

Common Area 1 000 SF (1) 1%

Total Gross Building Area (GBA) 72,100 SF 100%

III. Unit Mix
One Bedroom
# of Units
0%
Unit Size
0 Units

Two Bedroom 18 Units 40% 1,400 SF

Three Bedroom 27 Units 60% 1,700 SF

Four Bedroom 0 Units 0%

Total 45 Units 100% 1,580 SF
IV.

V.

VI.

VII.

Number of Stories
Density
Construction Type
Parking
Parking Type
2 Stories

15.0 Units/Acre
Type V (Wood)
Attached Garages

Number of Spaces
One Bedroom 1.50 Spaces/Unit
Two or More Bedrooms 2.00 Spaces/Unit 90 Spaces
Visitor 0.25 Spaces/Unit 12 Spaces
Total 2.27 Spaces/Unit 102 Spaces
(1) Reflects common area for community amenities.

Prepared by: Keyser Marston Associates, Inc.

FilenhaariAllaMPRONototypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 98 dO€1281

CITYWIDE - FOR-SALE

TOWNHOMES
TABLE C-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Townhomes
Direct Costs (1)
Total Per Unit Comments

Off-Site Improvements (2) $653,000 $14,500 $5 Per SF Site On-Site Improvements/Landscaping (2) $1,307,000 $29,000 $10 Per SF Site Parking $0 $0 Included Below
Shell Construction - Residential $12,618,000 $280,400 $175 Per SF GBA - Residential FF&E/Amenities $338,000 $7,500 Allowance
Contingency $746,000 $16,600 5.0% of Directs
Total Direct Costs $15,662,000 $348,000 $217 Per SF GBA II. Indirect Costs

Architecture & Engineering $1,096,000 $24,400 7.0% of Directs Permits & Fees - Residential (3) $1,080,000 $24,000 $15 Per SF GBA Community Facilities District No. 1 (Citywide) (4) $159,000 $3,500 $2 Per SF GBA Legal & Accounting $235,000 $5,200 1.5% of Directs
Taxes & Insurance $996,000 $22,100 3.0% of Market Value Developer Fee $626,000 $13,900 4.0% of Directs
Marketing/Sales $996,000 $22,100 3.0% of Market Value
Contingency $259,000 $5,800 5.0% of lndirects
Total Indirect Costs $5,447,000 $121,000 34.8% of Directs III. Financing Costs (51 $1,175,000 $26,100 7.5% of Directs IV. Total Development Costs (6) $22,284,000 $495,200 $309 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. (3) Based on Building Industry Association (BIA) of San Diego County 2020 Fee Survey. Includes, school, water/sewer, public facilities and traffic development impact fees, plan check, building permit, inspections, and other processing fees. (4) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(5) Includes loan fees, interest during construction, and interest during sales. (6) Excludes acquisition costs.

Prepared by: Keyser Marston Associates, Inc.

FilenMardi122d 4232ypes Analysis_v6_15%;4/12/2021;ema Item #4 Page 99 MOM

CITYWIDE - FOR-SALE

TOWNHOIVIES
TABLE C-3
ZZOZ 1ZZ 1-P i eW GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

Townhomes

100% @ Market-Rate
I. Gross Sales Proceeds
Unit Size # Units S/SF Price/Unit
85% @ Market-Rate / 15% ® Low
# Units $/SF Price/Unit Total Total
A. Market-Rate
Two Bedroom
Three Bedroom
Subtotal/Average
B. Affordable 0.)
Two Bedroom
Three Bedroom
Subtotal/Average
C. Total/Average
1,400 SF 18 $480 $672,000 $12,096,000
2,2P0 SF 27 $460 $782,000 $21,114,000
1,580 SF 45 $467 $738,000 $33,210,000
1,400 SF 0 $0 $0 $0
1 700 SF o $12
1,580 SF 0 $0 $0 o
1,580 SF 45 $467 $738,000 $33,210,000
15 $480 $672,000 $10,080,000
23 $460 $782,000 $17,986,000
38 $468 $739,000 $28,066,000
3 $209 $293,000 $879,000
4 $210 $357,000 $1,428,000
7 $209 $330,000 $2,307,000
45 $427 $675,000 $30,373,000
II. Total Gross Sales Proceeds
(Less) Cost of Sale
(Less) Target Developer Profit
III. Total Net Sales Proceeds
(Less) Development Costs

3.0% of Value

10.0% of Value
$33,210,000
($996,000)
($3,321,000)
$28,893,000
($22,284,000)

3.0% of Value

10.0% of Value
$30,373,000
($911,000)
($3,037,000)
$26,425,000
($22,284,000)
$4,141,000
$92,000
$32
IV. Residual Land Value $6,609,000
Per Unit $147,000
Per SF Site $51
18T 40 OM aed
(1) Source: City of Carlsbad 2020 household income limits. Assumes maximum ownership housing payment at 30% of 80% Area Median Income (AMI); see Worksheet 4.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_y6_15%;4/12/2021;ema Page 51

Garden Apartments

CITYWIDE - RENTAL

GARDEN APARTMENTS
TABLE D-1

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
I.

II.

Site Area
Gross Building Area

5.00 Acres

Residential Area 123,900 SF 99%

Common Area 1 000 SF 1%

Total Gross Building Area (GBA) 124,900 SF 100%

III. Unit Mix # of Units Unit Size

One Bedroom 31 Units 25% 750 SF

Two Bedroom 75 Units 60% 1,000 SF

Three Bedroom 19 Units 15% 1,350 SF

Fou r Bedroom 0 Units 0% _- SF

Total 125 Units 100% 991 SF
IV. Number of Stories 3 Stories

V. Density 25.0 Units/Acre

VI. Construction Type Type V (Wood)

VII. Parking

Parking Type Surface/Carports/Private Garages

Number of Spaces
One Bedroom 1.50 Spaces/Unit 47 Spaces
Two or More Bedrooms 2.00 Spaces/Unit 188 Spaces
Visitor 0.25 Spaces/Unit 32 Spaces
Total 2.13 Spaces/Unit 267 Spaces
Prepared by: Keyser Marston Associates, Inc.

FilenMaliAllaNbaDNototypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 101 afg11§1

TABLE D-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Garden Apartments
Direct Costs" )
Total Per Unit Comments

Off-Site Improvements (2) $1,089,000 $8,700 $5 Per SF Site On-Site Improvements/Landscaping (2) $2,178,000 $17,400 $10 Per SF Site Parking $0 $0 Included Above
Shell Construction - Residential $21,233,000 $169,900 $170 Per SF GBA - Residential FF&E/Amenities $1,250,000 $10,000 Allowance
Contingency $1,288,000 $10,300 5.0% of Directs
Total Direct Costs $27,038,000 $216,300 $216 Per SF GBA II. Indirect Costs

Architecture & Engineering $1,893,000 $15,100 7.0% of Directs Permits & Fees - Residential (3) $2,125,000 $17,000 $17 Per SF GBA Community Facilities District No. 1 (Citywide) (4) $442,000 $3,500 $4 Per SF GBA Legal & Accounting $406,000 $3,200 1.5% of Directs
Taxes & Insurance $406,000 $3,200 1.5% of Directs
Developer Fee $1,082,000 $8,700 4.0% of Directs
Marketing/Lease-Up $938,000 $7,500 3.5% of Directs
Contingency $365,000 $2,900 5.0% of Indirects
Total Indirect Costs $7,657,000 $61,300 28.3% of Directs III. Financing Costs151 $2,028,000 $16,200 7.5% of Directs IV. Total Development Costs (6) $36,723,000 $293,800 $294 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. (3) Based on Building Industry Association (BIA) of San Diego County 2020 Fee Survey. Includes, school, water/sewer, public facilities and traffic development impact fees, plan check, building permit, inspections, and other processing fees. (4) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(5) Includes loan fees, interest during construction, and interest during sales. (6) Excludes acquisition costs.

Prepared by: Ke,mr Marston Associates, Inc.

FilenaR4r4s4A, ace4pes Analysis_v6_15%;4/12/2021;ema Item #4 Page 102 (Rtglen

$4,750 /Unit/Year
$5,592 /Unit/Year
$30(2 /Unit/Year
$10,642 /Unit/Year

33.7% of EGI
III. Operating Expenses
(Less) Operating Expenses
(Less) Property Taxes/Assessments 12)
(Less) Replacement Reserves
Total Operating Expenses
Annual # Units 5/SF $/Month 111

(1) Source: City of Carlsbad 2020 household income limits. Reflects 30% monthly income at 70% Area Median Income (AMI); see Worksheet 5. (2) Based on capitalized income approach; assumes a 4.5% capitalization rate and a 1.20% tax rate.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad Prototypes Analysis_v6_15%;4/12/2021;ema TABLE D-3

NET OPERATING INCOME
INCLUSIONARY HOUSING 1N-LIEU FEE UPDATE

CITY OF CARLSBAD
I. Gross Scheduled Income (GSI)
100% ® Market-Rate
ZZOZ ‘ZZ tipi elAl
Annual
$837,000
$2,475,000
$771,000
$4,083,000
$4,083,000
$75,000.
$4,158,000
($208,000)
$3,950,000
($593,800)
($699,000)
($37,500)
($1,330,300)
$2,619,700

A. Market-Rate
Unit Size # Units $/SF $/Month

One Bedroom 750 SF 31 $3.00 $2,250

Two Bedroom 1,000 SF 75 $2.75 $2,750

Three Bedroom 1 350 SF 19 $2.50 $3,380

Subtotal/Average 991 SF 125 $2.74 $2,720

B. Affordable

One Bedroom 750 SF

Two Bedroom 1,000 SF

Three Bedroom 1 350 SF

Subtotal/Average 991 SF

C. Total/Average 991 SF 125 $2.74 $2,720

Add: Other Income

$50 /Unit/Month

D. Total Gross Scheduled Income (GS')

II. Effective Gross Income

e ro (Less) Vacancy

5.0% of GSI
3 Effective Gross Income (EGI)

IV. Net Operating Income (Not)
26 $3.00 $2,250 $702,000
64 $2.75 $2,750 $2,112,000
16 $2.50 $3,380 $649,000
106 $2.74 $2,720 $3,463,000
5 $2.11 $1,585 $95,000
11 $1.78 $1,776 $234,000
3 $1.58 $2,132 $77,000
19 $1.80 $1,781 $406,000
125 $2.60 $2,580 $3,869,000
$25 /Unit/Month $38,000
$3,907,000

5.0% of GS] ($195,000)
$3,712,000
$4,750 /Unit/Year ($593,800)
$5,192 /Unit/Year ($648,000)
$300 /Unit/Year ($37,500)
$10,242 /Unit/Year ($1,279,300)

34.5% of EGI
$2,432,700
-M T 40 EN aged
85% @ Market-Rate / 15% @ Low
Garden Apartments

CITYWIDE - RENTAL

GARDEN APARTMENTS
zzaz 'zz t-pl evg TABLE D-4

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Garden Apartments
100% @ Market-Rate 85% @ Market-Rate / 15% @ Low
I. Capitalized Value Upon Completion
Stabilized Net Operating Income
Capitalization Rate @
Capitalized Value Upon Completion
(Less) Cost of Sale
(Less) Target Developer Profit
$2,432,700

4.50%
$432,000 /Unit $54,060,000

2.5% of Value ($1,352,000)

10.0% of Value ($5,406,000)
$2,619,700

4.50%
$466,000 /Unit $58,216,000

2.5% of Value ($1,455,000)

10.0% of Value ($5,822,000)
II. Net Sales Proceeds $50,939,000

$47,302,000

(Less) Development Costs ($36,723,000) ($36,723,000)

Residual Land Value $14,216,000
Per Unit $114,000
Per SF Site $65
$10,579,000
$85,000
$49
T8T JO VOT aed
Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad Prototypes Analysis_y6_15%;4/12/2021;ema Page 55

CITYWIDE - RENTAL

STACKED FLATS OVER

TUCK-UNDER PARKING
TABLE E-1
100% AFFORDABLE

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over Tuck-under Parking
I.

II.

Site Area
Gross Building Area

2.00 Acres

Residential Area

53,100 SF 87.5%

Common Area

7 586 SF 12.5%

Total Gross Building Area (GBA)

60,686 SF 100%

III. Unit Mix

# of Units Unit Size

One Bedroom

24 Units 40% 750 SF

Two Bedroom

30 Units 50% 950 SF

Three Bedroom

6 Units 10% 1,100 SF

Four Bedroom

0 Units 0% - SF

Total

60 Units 100% 885 SF
IV. Affordability Mix

50% of AMI

59 Units 98% (1)

Manager

1 Unit 2%

Total/Average

60 Units 100%

Average Affordability (excl. Manager)

50% AMI

V. Number of Stories

3 Stories

VI. Density

30 Units/Acre

VII. Construction Type

Type V (Wood)

VIII. Parking

Parking Type

Tuck-under

Number of Spaces

One Bedroom

1.50 Spaces/Unit 36 Spaces

Two or More Bedrooms

2.00 Spaces/Unit 72 Spaces

Visitor

0.25 Spaces/Unit 15 Spaces

Subtotal

2.05 Spaces/Unit 123 Spaces

(Less) Affordable Housing Reduction @ 25.0% 0.52 Spaces/Unit (31) Spaces

Total

1.53 Spaces/Unit 92 Spaces

(1) Assumes range of affordability from 30% AMI to 60% AMI, with average affordability at 50% AK.

Prepared by: Keyser Marston Associates, Inc.

FilenatMaKalad Q2c1.2ypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 105 &WU

TABLE E-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

CITYWIDE - RENTAL

STACKED FLATS OVER

TUCK-UNDER PARKING
100% AFFORDABLE
Stacked Flats over Tuck-under Parking
Direct Costs (1)
Total Per Unit Comments

Off-Site Improvements (2) $436,000 $7,000 $5 Per SF Site On-Site Improvements/Landscaping (21 $871,000 $15,000 $10 Per SF Site Parking $1,380,000 $23,000 $15,000 Per Space
Shell Construction - Residential $10,317,000 $172,000 $170 Per SF GBA FF&E/Amenities $150,000 $2,500 Allowance
Subtotal $13,154,000 $219,000 $217 Per SF GBA
Add: Prevailing Wages $1,973,000 $33,000 15.0% of Directs Contingency $756,000 $13,000 5.0% of Directs
Total Direct Costs $15,883,000 $265,000 $262 Per SF GBA II. Indirect Costs

Architecture & Engineering $794,000 $13,000 5.0% of Directs Permits & Fees - Residential (3) $1,080,000 $18,000 $18 Per SF GBA Community Facilities District No. 1 (Citywide) (41 $212,000 $4,000 $3 Per SF GBA Legal & Accounting $238,000 $4,000 1.5% of Directs
Taxes & Insurance $238,000 $4,000 1.5% of Directs
Developer Fee $2,907,000 $48,000 18.3% of Directs
Marketing/Lease-Up $150,000 $2,500 0.9% of Directs
Contingency $281,000 $5,000 5.0% of Indirects
Total Indirect Costs $5,900,000 $98,000 37.1% of Directs Financing Costs

Loan Fees $736,000 $12,000 4.6% of Directs
Interest During Constructions $331,000 $6,000 2.1% of Directs Title/Recording/Escrow $50,000 $1,000 0.3% of Directs
Interest During Lease-Up $276,000 $5,000 1.7% of Directs TCAC/Syndication Fees $138,000 $2,000 0.9% of Directs
Operating Lease-Up/Reserves $227,000 $4,000 1.4% of Directs Total Financing Costs $1,758,000 $29,000 11.1% of Directs IV. Total Development Costs (5) $23,541,000 $392,000 $388 Per SF GBA (1) Includes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. (3) Based on Building Industry Association (BIA) of San Diego County 2020 Fee Survey. Includes, school, water/sewer, public facilities and traffic development impact fees, plan check, building permit, inspections, and other processing fees. (4) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.

PWag5 iHjil:Telte lPAigaM$, sstssdciates, Inc.

Fi le narfla al-cQhsaa, aa2t;pes Ana lysis_v6_15%;4/12/2021;lag Item #4 Page 106 8fglIP1

CITYWIDE - RENTAL

STACKED FLATS OVER

TUCK-UNDER PARKING
100% AFFORDABLE
TABLE E-3

NET OPERATING INCOME

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Rats over Tuck-Under Parking
4% Tax Credits w/MHP
I. Gross Scheduled Income (GS!)
Unit Size # Units $/SF 5/Month (1) Annual

One Bedroom @ 50% AMI 750 SF 24 $1.40 $1,050 $302,000
Two Bedroom @ 50% AMI 950 SF 29 $1.32 $1,256 $437,000
Two Bedroom Manager 950 SF 1 $0.00 $0 $0
Three Bedroom @ 50% AMI 1,100 SF 6 $1.32 $1,449 $104,000 Total/Average 885 SF 60 $1.32 $1,171 $843,000
Add: Other Income

$10 /Unit/Month

$7,000
Total Gross Scheduled Income (GSI)

$850,000
II. Effective Gross Income

(Less) Vacancy

5.0% of GS!

($43,000)
Effective Gross Income (EGI)

$807,000
III. Operating Expenses

(Less) Operating Expenses

$5,250 /Unit/Year

($315,000)
(Less) Tenant Services

$500 /Unit/Year

($30,000)
(Less) Property Taxes 121

$167 /Unit/Year

($10,000)
(Less) Replacement Reserves

$500 /Unit/Year

($30,000)
Total Operating Expenses

$6,417 /Unit/Year

($385,000)

47.7% of EGI

IV. Net Operating Income (N01)

$422,000
(1) See Worksheet 6 for calculation of affordable rents. (2) Assumes project will qualify for tax-exempt status.

Prepared by: Keyser Marston Associates, Inc.

FilenAU\didad 202olypes An a lysis_y6_15%;4/12/2021;lag Item #4 Page 107 MOM

CITYWIDE - RENTAL

STACKED FLATS OVER
TABLE E-4 TUCK-UNDER PARKING
100% AFFORDABLE

RESIDUAL LAND VALUE AND FINANCING DEFICIT

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over Tuck-Under Parking
4% Tax Credits with IVIHP
I. Sources of Funds Total Per Unit

Supportable Permanent Loan (1) $6,802,000 $113,000

Tax Credit Equity Investment 2) $8,058,000 $134,000

Multifamily Housing Program (MHP) (3) $3,000,000 $50,000

Affordable Housing Program (AHP) $600,000 $10,000

Deferred Developer Fee/General Partner Equity Contribution 14) $407,000 $7,000

Income During Lease-Up $60,000 $1,000

Total Sources of Funds $18,927,000 $315,000
II. (Less) Development Costs ($23,541,000) ($392,000)

III. Residual Land Value ($4,614,000) ($77,000)
IV. (Less) Acquisition Cost ($6,000,000) ($100,000)
V. Financing Deficit ($10,614,000) ($177,000) i
Prepared by: Keyser Marston Associates, Inc.

FilenaA4KCI)12)41 Ifl?o ,7ypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 108 MOM

CITYWIDE - RENTAL

STACKED FLATS OVER
TABLE E-4 (CONT'D.) TUCK-UNDER PARKING
100% AFFORDABLE

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over
Tuck-Under Parking
(1) Supportable Permanent Loan
4% Tax Credits with MHP

NOI $422,000
Interest Rate 4.50%
Term (years) 40
Debt Coverage Ratio 1.15
Annual Debt Service $366,957
Supportable Permanent Loan $6,802,000
(2) Low Income Housing Tax Credits (Federal)

Estimate of Eligible Basis:

Total Development Costs

$23,541,000
(Less) Ineligible Costs 5.3% ($1,251,000)
Eligible Basis

$22,290,000
Tax Credit Proceeds:

Maximum Eligible Basis

$22,290,000
(Less) Voluntary Credit Adjustment 0,0%

Total Requested Unadjusted Basis

$22,290,000
Impacted Bonus Factor 130% $28,977,000
Tax Credit Qualified Units/Applicable Factor 100% $28,977,000 Tax Credit Rate 3.09% $895,389
Total Tax Credits @ 10 $8,953,893
Limited Partner Share 99.99% $8,952,998
Tax Credit Equity Investment @ 90.0% $8,058,000
(3) Multifamily Housing Program (MHP)

Restricted Units 60 Units
Total MHP Loan $50,000 /Unit

$3,000,000
(4) Estimate of Deferred Developer Fee

Eligible Basis

$22,290,000
(Less) Developer Fee

($2,907,000)
Unadjusted Eligible Basis

$19,383,000
Total Developer Fee 15.0% $2,907,000
Developer Overhead Fee

$2,907,000
(Less) Deferred Developer Fee 14.0% ($407,000)
Upfront Developer Fee

$2,500,000
Prepared by: Keyser Marston Associates, Inc.

FilenaMainhsRat PlaZdes Analysis_v6_15%;4/12/2021;lag Item #4 Page 109 MEM

APPENDIX 4
In-Lieu Fee Financial Analysis
Village and Barrio
Inclusionary Housing In-Lieu Fee Update
City of Carlsbad
March 22, 2022 Item #4 Page 110 8nrin

Stacked Flats over Tuck-under

VILLAGE GENERAL - FOR-SALE

STACKED FLATS OVER
TABLE F-1 TUCK-UNDER PARKING

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
I.

II.

Site Area
Gross Building Area

0.50 Acres

Residential Area 13,300 SF 87.5%

Common Area 1 900 SF 12.5%

Total Gross Building Area (GBA) 15,200 SF 100.0%

III. Unit Mix
Studio
# of Units
0%
Unit Size
0 Units

One Bedroom 2 Units 18% 950 SF

Two Bedroom 7 Units 64% 1,200 SF

Three Bedroom 2 Units 18% 1 500 SF

Total 11 Units 82% 1,209 SF
IV.

V.

VI.

VII.

Number of Stories
Density
Construction Type
Parking
Parking Type
3 Stories
23 Units/Acre
Type V (Wood)
Tuck-under

Number of Spaces
One Bedroom 1.00 Spaces/Unit 2 Spaces
Two or More Bedrooms 2.00 Spaces/Unit 18 Spaces
Visitor 0.00 Spaces/Unit 0 Spaces
Total 1.82 Spaces/Unit 20 Spaces
Prepared by: Keyser Marston Associates, Inc.

FilenNialiAklaNaMototypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 111 efe-n

TABLE F-2

VILLAGE GENERAL - FOR-SALE

STACKED FLATS OVER

TUCK-UNDER PARKING

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over Tuck-under

Total Per Unit Comments
Direct Costs (1)

Off-Site Improvements (2) $0 $0 $0 Per SF Site
On-Site Improvements/Landscaping (2) $327,000 $29,700 $15 Per SF Site Parking $300,000 $27,300 $15,000 Per Space
Shell Construction - Residential $2,888,000 $262,500 $190 Per SF GBA - Residential FF&E/Amenities $83,000 $7,500 Allowance
Contingency $180,000 $16,400 5.0% of Directs
Total Direct Costs $3,778,000 $343,500 $249 Per SF GBA
II. Indirect Costs

Architecture & Engineering $189,000 $17,200 5.0% of Directs Permits & Fees - Residential (3) $198,000 $18,000 $13 Per SF GBA Community Facilities District No. 1 (Citywide) 14} $39,000 $3,500 $3 Per SF GBA Legal & Accounting $57,000 $5,200 1.5% of Directs
Taxes & Insurance $308,000 $28,000 3.0% of Market Value Developer Fee $151,000 $13,700 4.0% of Directs
Marketing/Sales $308,000 $28,000 3.0% of Market Value
Contingency $63,000 $5,70(11 5.0% of Indirects
Total Indirect Costs $1,313,000 $119,400 34.8% of Directs III. Financing Costs (51 $378,000 $34,400 10.0% of Directs IV. Total Development Costs (6) $5,469,000 $497,200 $360 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. (3) Based on Building Industry Association (BIA) of San Diego County 2020 Fee Survey. Includes, school, water/sewer, public facilities and traffic development impact fees, plan check, building permit, inspections, and other processing fees. (4) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(5) Includes loan fees, interest during construction, and interest during sales. (6) Excludes acquisition costs.

Prepared by: Keyser Marston Associates, Inc.

FilenMardls22d WRaypes Analysis_v6_15%;4/12/2021;ema Item #4 Page 112 8fe-Efl

100% @ Market-Rate
I. Gross Sales Proceeds
85% @ Market-Rate / 15% @ Low

Unit Size # Units S/SF

A. Market-Rate

One Bedroom 950 SF 2 $800 $760,000
Two Bedroom 1,200 SF 7 $775 $930,000
Three Bedroom 1 500 SF 2 $750 $1,125,000
Subtotal/Average 1,209 SF 11 $773 $935,000
B. Affordable (1)

One Bedroom 950 SF o $o $o
Two Bedroom 1,200 SF 0 $o $0
Three Bedroom 1 500 SF

o
Subtotal/Average 1,209 SF 0 $0 $0
C. Total/Average 1,209 SF 11 $773 $935,000
Total
$1,520,000
$6,510,000
$2,250,000
$10,280,000
$0
$0
$0
$10,280,000
II. Total Gross Sales Proceeds
(Less) Cost of Sale
(Less) Target Developer Profit
III. Total Net Sales Proceeds
(Less) Development Costs
$10,280,000

3.0% of Value ($308,000)

12.0% of Value ($1,234,000)
$8,738,000
($5,469,000)
I .
3 IV. Residual Land Value $3,269,000
Per Unit $297,000
Per SF Site $150
$2,059,000
$187,000
$95
in lo Eir aSed
# Units $/SF Price/Unit Total
2 $800 $760,000 $1,520,000
6 $775 $930,000 $5,580,000
1 $750 $1,125,000 $1,125,000
9 $756 $914,000 $8,225,000
0 $267 $254,000 $0
1 $237 $284,000 $284,000
1 $232 $348,000 $348,000
2 $261 $316,000 $632,000
11 $666 $805,000 $8,857,000
$8,857,000

3.0% of Value ($266,000)

12.0% of Value ($1,063,000)
$7,528,000
($5,469,000)

TABLE F-3

VILLAGE GENERAL - FOR-SALE

STACKED FLATS OVER

TUCK-UNDER PARKING
zzoz 'zz Lii iew

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

Stacked Flats over Tuck-under

(11 Source: City of Carlsbad 2020 household income limits. Assumes maximum ownership housing payment at 30% of 80% Area Median Income (AMI); see Worksheet 7.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_y6_15%;4/12/2021;ema Page 64

VILLAGE CENTER - FOR-SALE

MIXED-USE STACKED FLATS OVER
TABLE G-1 PODIUM PARKING

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Mixed-Use Stacked Flats
I.

II.

Site Area
Gross Building Area

0.50 Acres

Residential Area 20,300 SF 85%

Common Area 3 582 SF 15%

Total Residential Area 23,882 SF 100%

III.

Retail
Total Gross Building Area (GBA)
Unit Mix
Studio
3 000 SF
0%
Unit Size
26,882 SF
# of Units
0 Units

One Bedroom 4 Units 24% 950 SF

Two Bedroom 10 Units 59% 1,200 SF

Three Bedroom 3 Units 18% 1 500 SF

Total 17 Units 100% 1,194 SF
IV.

V.

VI.

VII.

Number of Stories
Density
Construction Type
Parking
Parking Type
4 Stories
35 Units/Acre
Type V (Wood)
Podium

Number of Spaces
One Bedroom 1.00 Spaces/Unit 4 Spaces
Two or More Bedrooms 2.00 Spaces/Unit 26 Spaces
Visitor 0.00 Spaces/Unit 0 Spaces
Subtotal 1.76 Spaces/Unit 30 Spaces
Retail 1.00 Space/415 SF 8 Spaces
Total 38 Spaces
Prepared by: Keyser Marston Associates, Inc.

Filenaklardir2gad202Ztypes Analysis_y6_15%;4/12/2021;lag Item #4 Page 114 Sten

VILLAGE CENTER - FOR-SALE

MIXED-USE STACKED FLATS OVER

PODIUM PARKING
TABLE G-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Mixed-Use Stacked Flats
Direct Costs (1)
Total Per Unit Comments

Off-Site Improvements (2) $0 $0 $0 Per SF Site
On-Site Improvements/Landscaping 12} $327,000 $19,200 $15 Per SF Site Parking $1,140,000 $67,100 $30,000 Per Space
Shell Construction - Residential $4,776,000 $280,900 $200 Per SF GBA - Residential Shell Construction - Retail $450,000 $26,500 $150 Per SF GBA - Retail FF&E/Amenities $128,000 $7,500 Allowance
Tenant Improvements $150,000 $8,800 $50 Per SF Net - Retail Contingency $349,000 $20,500 5.0% of Directs
Total Direct Costs $7,320,000 $430,600 $272 Per SF GBA
II. Indirect Costs

Architecture & Engineering $366,000 $21,500 5.0% of Directs Permits & Fees - Residential (2) $198,000 $18,000 $8 Per SF GBA - Residential Permits & Fees - Retail 12) $33,000 $1,900 $11 Per SF GBA - Retail Community Facilities District No. 1 (Citywide) (3) $60,000 $3,500 $2 Per SF GBA Legal & Accounting $110,000 $6,500 1.5% of Directs
Taxes & Insurance $466,000 $27,400 3.0% of Market Value Developer Fee $293,000 $17,200 4.0% of Directs
Marketing/Sales $466,000 $27,400 3.0% of Market Value
Contingency $100,000 $5,900 5.0% of Indirects
Total Indirect Costs $2,092,000 $123,100 28.6% of Directs III. Financing Costs (4) $732,000 $43,100 10.0% of Directs IV. Total Development Costs (5) $10,144,000 $596,700 $377 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. Includes, school, water/sewer, plan check, building permit, inspections, and other processing fees.
(3) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(4) Includes loan fees, interest during construction, and interest during sales. (5) Excludes acquisition costs.

Prepared by: Kexs..?r Marston Associates, Inc.

In124pes Analysis_v6_15%;4/12/2021;ema Item #4 Page 115 8012£ff

VILLAGE CENTER - FOR-SALE

MIXED-USE STACKED FLATS OVER

PODIUM PARKING
TABLE G-3
ZZOZ ‘ZZ 1-13-1e1A1

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

Mixed-Use Stacked Flats

100% @ Market-Rate
I. Gross Sales Proceeds
85% @ Market-Rate / 15% @ Low

Unit Size # Units $/$F Price/Unit
A. Market-Rate

One Bedroom 950 SF 4 $785 $746,000
Two Bedroom 1,200 SF 10 $765 $918,000
Three Bedroom 1 500 SF 3 $750 $1,125,000
Subtotal/Average 1,194 SF 17 $765 $914,000
B. Affordable (i)

One Bedroom 950 SF 0 $0 $0
Two Bedroom 1,200 SF 0 $0 $0
Three Bedroom 1 500 SF 0 .$2 LI
Subtotal/Average 1,194 SF 0 $0 $0
C. Total/Average 1,194 SF 17 $765 $914,000
# Units $/SF Price/Unit Total
$2,984,000 3 $785 $746,000 $2,238,000
$9,180,000 8 $765 $918,000 $7,344,000
$3,375,000 3 $750 $1,125,000 $3,375,000
$15,539,000 14 $775 $926,000 $12,957,000
$0 1 $258 $245,000 $245,000
$0 2 $229 $275,000 $550,000
12 0 $226 $339,000 $1
$0 3 $222 $265,000 $795,000
$15,539,000 17 $677 $809,000 $13,752,000
Total
II. Total Gross Sales Proceeds $15,539,000 $13,752,000
Add: Value of Retail Component (2) $1,662,000 $1,662,000 (Less) Cost of Sale 3.0% of Value ($516,000) 3.0% of Value ($462,000) (Less) Target Developer Profit 12.0% of Value ($2,064,000) 12.0% of Value ($1,850,000) Ill. Total Net Sales Proceeds $14,621,000 $13,102,000
(Less) Development Costs ($10,144,000) ($10,144,000)
IV. Residual Land Value $4,477,000 $2,958,000
Per Unit $263,000 $174,000
Per SF Site $206 $136
(1) Source: City of Carlsbad 2020 household income limits. Assumes maximum ownership housing payment at 30% of 80% Area Median Income (AMI); see Worksheet 8. (2) Value of retail component assumes $3.50/SF/Month/NNN rent, vacancy at 10.0% of GSI, unreimbursed expenses of 5.0% of EGI, and a capitalization rate of 6.5%.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;ema Page 67 IST 40 TR aed

Zero Lot Line Rowhomes

BARRIO CENTER - FOR-SALE

ZERO LOT LINE ROWHOMES
TABLE H-1

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
I.

II.

Site Area
Gross Building Area

0.50 Acres

Residential Area 10,000 SF 100%

Common Area 0 SF 0%

Total Gross Building Area (GBA) 10,000 SF 100%

III. Unit Mix # of Units Unit Size

Studio 0 Units 0% -

One Bedroom 0 Units 0% - SF

Two Bedroom 2 Units 29% 1,250 SF

Three Bedroom 5 Units 71% 1 500 SF

Total 7 Units 100% 1,429 SF
IV. Number of Stories 3 Stories

V. Density 14 Units/Acre

VI. Construction Type Type V (Wood)

VII. Parking

Parking Type Attached Garages / Surface

Residential 2.0 Spaces/Unit 14 Spaces

Guest Parking 0.25 Spaces/Unit 2 Spaces

Total Spaces 2.29 Spaces/Unit 16 Spaces

Prepared by: Keyser Marston Associates, Inc.

Filendbfiarigtaba0232ototypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 117 d'Oeff

BARRIO CENTER - FOR-SALE

ZERO LOT LINE ROWHOMES
TABLE H-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Zero Lot Line Rowhomes
Direct Costs (1)
Total Per Unit Comments

Off-Site Improvements (2) $0 $0 $0 Per SF Site
On-Site Improvements/Landscaping (21 $218,000 $31,100 $10 Per SF Site Parking $o $o Included Below
Shell Construction - Residential $1,950,000 $278,600 $195 Per SF GBA - Residential FF&E/Amenities $53,000 $7,500 Allowance
Contingency $111,000 $15,900 5.0% of Directs
Total Direct Costs $2,332,000 $333,100 $233 Per SF GBA
Indirect Costs

Architecture & Engineering $117,000 $16,700 5.0% of Directs Permits & Fees - Residential (2) $168,000 $24,000 $17 Per SF GBA Community Facilities District No. 1 (Citywide) 131 $25,000 $3,600 $3 Per SF GBA Legal & Accounting $35,000 $5,000 1.5% of Directs
Taxes & Insurance $154,000 $22,000 3.0% of Market Value Developer Fee $93,000 $13,300 4.0% of Directs
Marketing/Sales $154,000 $22,000 3.0% of Market Value
Contingency $37,000 $5,300 5.0% of Indirects
Total Indirect Costs $783,000 $111,900 33.6% of Directs III. Financing Costs (41 $175,000 $25,000 7.5% of Directs IV. Total Development Costs (51 $3,290,000 $470,000 $329 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by KMA or the City. Includes, school, water/sewer, plan check, building permit, inspections, and other processing fees.
(3) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(4) Includes loan fees, interest during construction, and interest during sales. (5) Excludes acquisition costs.

Prepared by: Keyser Marston Associates, Inc.

FilenMAndlis141 42olypes Analysis_y6_15%;4/12/2021;ema Item 1#4 Page 118 di0e£§1

BARRIO CENTER - FOR-SALE
ZERO LOT LINE ROWHOIViES
ZZOZ `ZZ LIDJE1/11
TABLE H-3

GROSS SALES PROCEEDS AND RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

Zero Lot Line Rowhomes

100% @ Market-Rate
I. Gross Sales Proceeds
85% @ Market-Rate / 15% @ Low
A. Market-Rate
Unit Size # Units $/SF Price/Unit

Two Bedroom 1,250 SF 2 $550 $688,000
Three Bedroom 1 500 SF 5 $500 $750,000
Subtotal/Average 1,429 SF 7 $512 $732,000
B. Affordable Ill

Two Bedroom 1,250 SF 0 $0 $0
Three Bedroom 1 500 SF

Subtotal/Average 1,429 SF 0 $0 $0
C. Total/Average 1,429 SF 7 $512 $732,000
# Units S/SF Price/Unit Total
2 $550 $688,000 $1,376,000
4 $500 $750,000 $3,000,000
6 $510 $729,000 $4,376,000
o $0 $0 $0
1 $256 $384,000 $384,000
1 $269 $384,000 $384,000
7 $476 $680,000 $4,760,000
Total
$1,376,000
$3,750,000
$5,126,000
$0
$13'
$0
$5,126,000
Total Gross Sales Proceeds
(Less) Cost of Sale
(Less) Target Developer Profit
7-; III. Total Net Sales Proceeds ftl
3 (Less) Development Costs
$5,126,000
($154,000)
($513,000)
$4,459,000
($3,290,000)
$4,760,000

3.0% of Value ($143,000)

10.0% of Value ($476,000)
$4,141,000
($3,290,000)

3.0% of Value

10.0% of Value
$851,000
$122,000
$39
IV. Residual Land Value $1,169,000
Per Unit $167,000
Per SF Site $54
i8 T 40 611 aSed
(1) Source: City of Carlsbad 2020 household income limits. Assumes maximum ownership housing payment at 30% of 80% Area Median Income (AMI); see Worksheet 9.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_y6_15%;4/12/2021;ema Page 70

BARRIO PERIMETER - RENTAL

STACKED FLATS OVER
TABLE 1-1 TUCK-UNDER PARKING

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
I.

II.

Site Area
Gross Building Area

0.50 Acres

Residential Area 12,850 SF 87.5%

Common Area 1 836 SF 12.5%

Total Gross Building Area (GBA) 14,686 SF 100.0%

III. Unit Mix
Studio
# of Units
0%
Unit Size
0 Units - SF

One Bedroom 7 Units 47% 750 SF

Two Bedroom 8 Units 53% 950 SF

Three Bedroom 0 Units 0% - SF

Total 15 Units 100% 857 SF
IV.

V.

VI.

VII.

Number of Stories
Density
Construction Type
Parking
Parking Type
3 Stories
30 Units/Acre
Type V (Wood)
Tuck-under

Number of Spaces
One Bedroom 1.00 Spaces/Unit 7 Spaces
Two or More Bedrooms 2.00 Spaces/Unit 16 Spaces
Visitor 0.25 Spaces/Unit 4 Spaces
Total 1.80 Spaces/Unit 27 Spaces
Prepared by: Keyser Marston Associates, Inc.

Filenhid lif4ffaUbid)2'2ototypes Analysis_v6_15%;4/12/2021;lag Item #4 Page 120 (WM

BARRIO PERIMETER - RENTAL
TABLE 1-2 STACKED FLATS OVER

TUCK-UNDER PARKING

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over Tuck-under
I. Direct Costs (1)
Total Per Unit Comments

Off-Site Improvements (2) $0 $0 $0 Per SF Site

On-Site Improvements/Landscaping (2) $218,000 $14,500 $10 Per SF Site

Parking $405,000 $27,000 $15,000 Per Space

Shell Construction - Residential $2,717,000 $181,100 $185 Per SF GBA - Residential

FF&E/Amenities $75,000 $5,000 Allowance

Contingency $171,000 $11,400 5.0% of Directs

Total Direct Costs $3,586,000 $239,100 $244 Per SF GBA
II. Indirect Costs
Architecture & Engineering $179,000 $11,900 5.0% of Directs

Permits & Fees - Residential 12) $270,000 $18,000 $18 Per SF GBA

Community Facilities District No. 1 (Citywide) (3) $53,000 $3,500 $4 Per SF GBA

Legal & Accounting $54,000 $3,600 1.5% of Directs

Taxes & Insurance $54,000 $3,600 1.5% of Directs

Developer Fee $143,000 $9,500 4.0% of Directs

Marketing/Lease-Up $38,000 $2,500 1.1% of Directs

Contingency $40,000 $2,700 5.0% of Indirects

Total Indirect Costs $831,000 $55,400 23.2% of Directs
III. Financing Costs (4) $359,000 $23,900 10.0% of Directs IV. Total Development Costs (5) $4,776,000 $318,400 $325 Per SF GBA (1) Excludes the payment of prevailing wages.
(2) Estimated allowance; not verified by (MA or the City. Includes, school, water/sewer, plan check, building permit, inspections, and other processing fees.
(3) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021. Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(4) Includes loan fees, interest during construction, and interest during sales. (5) Excludes acquisition costs.

Prepared by: reyser Marston Associates, Inc.

Filenakkatgliac2PralePes Ana lysis_v6_15%;4/12/2021;ema Item #4 Page 121 MOST

TABLE 1-3

NET OPERATING INCOME

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
(1) Source: City of Carlsbad 2020 household income limits. Reflects 30% monthly income at 70% Area Median Income (AMI); see Worksheet 5. (2) Based on capitalized income approach; assumes a 43% capitalization rate and a 1.20% tax rate.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;ema

BARRIO PERIMETER - RENTAL

STACKED FLATS OVER

TUCK-UNDER PARKING

ZZOZ 1-13-1e1A1 T81 40 ZZT aed
Stacked Flats over Tuck-under
($25,000)
$478,000

5.0% of GS!
IV. Net Operating Income (N01) $314,500 $339,500
85% @ Market-Rate/15% @ Low
# Units $/SF S/Month (1)
6 $3.60 $2,700
7 $3.30 $3,140
13 $3.43 $2,940
1 $2.11 $1,585 $19,000
1 $1.87 $1,776 $21,000
2 $1.95 $1,667 $40,000
15 $3.23 $2,767 $498,000
$25 /Unit/Month $5,000
$503,000
$5,000 /Unit/Year ($75,000)
$5,600 /Unit/Year ($84,000)
$300 /Unit/Year ($4,500)
$10,900 /Unit/Year ($163,500)

34.2% of EGI
Annual
$194,000
$264,000
$458,000
100% @ Market-Rate
I. Gross Scheduled Income (GSI)
Unit Size # Units S/SF 5/Month
A. Market-Rate

One Bedroom 750 SF 7 $3.60 $2,700
Two Bedroom 950 SF 8 $3.30 $3,140
Subtotal/Average 857 SF 15 $3.42 $2,933
B. Affordable

One Bedroom @ Low 750 SF

Two Bedroom @ Low 950 SF

Subtotal/Average 857 SF

C. Total/Average 857 SF 15 $3.39 $2,900
Add: Other Income

$50 /Unit/Month
D. Total Gross Scheduled Income (GSI)

II. Effective Gross Income

(Less) Vacancy

5.0% of GSI
Effective Gross Income (EGI)

Annual
$227,000
$301,000
$528,000
$528,000
$9,000
$537,000
($27,000)
$510,000
III. Operating Expenses
(Less) Operating Expenses
(Less) Property Taxes/Assessments 121
(Less) Replacement Reserves
Total Operating Expenses
$5,000 /Unit/Year ($75,000)
$6,067 /Unit/Year ($91,000)
$300 /Unit/Year ($4,500)
$11,367 /Unit/Year ($170,500)

33.4% of EGI

ZZOZ `ZZ q3JelAl TABLE 1-4

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD

BARRIO PERIMETER - RENTAL

STACKED FLATS OVER

TUCK-UNDER PARKING

Stacked Flats over Tuck-under
100% @ Market-Rate 85% @ Market-Rate / 15% @ Low
I. Capitalized Value Upon Completion
Stabilized Net Operating Income
Capitalization Rate @
Capitalized Value Upon Completion
(Less) Cost of Sale
(Less) Target Developer Profit
$314,500

4.50%
$466,000 /Unit $6,989,000

3.0% of Value ($210,000)

12.0% of Value ($839,000)
$339,500

4.50%
$503,000 /Unit $7,544,000

3.0% of Value ($226,000)

12.0% of Value ($905,000)

$5,940,000 Net Sales Proceeds $6,413,000

(Less) Development Costs ($4,776,000) ($4,776,000)

III. Residual Land Value $1,637,000
Per Unit $109,000
Per SF Site $75
$1,164,000
$78,000
$53
18 1 40 EZT 2ed
Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;ema Page 74

VILLAGE / BARRIO - RENTAL

STACKED FLATS OVER

PODIUM PARKING
TABLE 1-1 100% AFFORDABLE

PROJECT DESCRIPTION

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over Podium Parking
I.

II.

Site Area
Gross Building Area

0.50 Acres

Residential Area

12,090 SF 85%

Common Area

2 134 SF 15%

Total Gross Building Area (GBA)

14,224 SF 100%

III. Unit Mix

# of Units Unit Size

Studio

6 Units 30% 450 SF

One Bedroom

8 Units 40% 550 SF

Two Bedroom

4 Units 20% 750 SF

Three Bedroom

2 Units 10% 995 SF

Total

20 Units 100% 605 SF
IV, Affordability Mix
50% of AMI

19 Units 95% (1)

Manager

1 Unit 5%

Total/Average

20 Units 100%

Average Affordability (excl. Manager)

50% AMI

V. Number of Stories

3 Stories

VI, Density
Base Density

30 Units/Acre

Density Bonus @

35.0% 10 Units/Acre

Total Density

40 Units/Acre

VII. Construction Type

Type V (Wood)

VIII. Parking

Parking Type

Podium

Number of Spaces (1)

Studio and One Bedroom

1.00 Spaces/Unit 14 Spaces

Two or More Bedrooms

2.00 Spaces/Unit 12 Spaces

Visitor

0.25 Spaces/Unit 5 Spaces

Subtotal

1.55 Spaces/Unit 31 Spaces

(Less) Affordable Housing Reduction @ 25.0% 0.40 Spaces/Unit f_81 Spaces

Total

1.15 Spaces/Unit 23 Spaces

(1) Assumes range of affordability from SO% AMI to 60% AMI, with average affordability at 50% AMI.

Prepared by: Keyser Marston Associates, Inc.

Filenarl1/24KAhsRal, Fain4pes Analysis_v6_15%;4/12/2021;lag Item #4 Page 124 efglIft

4% Tax Credits w/MHP 9% Tax Credits
Total Per Unit Comments Total Per Unit Comments
TABLE J-2

DEVELOPMENT COSTS

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over Podium Parking
I. Direct Costs

Off-Site Improvements (I) $0 $0 $0 Per SF Site $0 $0 $0 Per SF Site On-Site Improvements/Landscaping (1) $327,000 $16,400 $15 Per SF Site $327,000 $16,400 $15 Per SF Site Parking $690,000 $34,500 $30,000 Per Space $690,000 $34,500 $30,000 Per Space Shell Construction - Residential $2,560,000 $128,000 $180 Per SF GBA $2,560,000 $128,000 $180 Per SF GBA FF&E/Amenities 70,000 $3,500 Allowance $70,000 $3,500 Allowance Subtotal $3,647,000 $182,400 $256 Per SF GBA $3,647,000 $182,400 $256 Per SF GBA Acid: Prevailing Wages $547,000 $27,400 15.0% of Directs $o $0 0.0% of Directs Contingency $210,000 $10,500 5.0% of Directs $182,000 $9,100 5.0% of Directs Total Direct Costs $4,404,000 $220,200 $310 Per SF GBA $3,829,000 $191,500 $269 Per SF GBA IL Indirect Costs

Architecture & Engineering $220,000 $11,000 5.0% of Directs $191,000 $9,600 5.0% of Directs Permits & Fees - Residential t2) $360,000 $18,000 $25 Per SF GBA $360,000 $18,000 $25 Per SF GBA Community Facilities District No. 1 (Citywide) °I $71,000 $3,600 $5 Per SF GBA $71,000 $3,600 $5 Per SF GBA Legal & Accounting $66,000 $3,300 1.5% of Directs $57,000 $2,900 1.5% of Directs Taxes & Insurance $66,000 $3,300 1.5% of Directs $57,000 $2,900 1.5% of Directs Developer Fee $831,000 $41,600 18.9% of Directs $757,000 $37,900 19.8% of Directs Marketing/Lease-Up $50,000 $2,500 1.1% of Directs $50,000 $2,500 1.3% of Directs Contingency $83,000 $4,200 5.0% of I ndirects $77,000 $3,900 5.0% of lndirects Total Indirect Costs $1,747,000 $87,400 39.7% of Directs $1,620,000 $81,000 42.3% of Directs III. Financing Costs
Loan Fees $210,000 $10,500 4.8% of Directs $125,000 $6,300 3.3% of Directs Interest During Constructions $142,000 $7,100 3.2% of Directs $228,000 $11,400 6.0% of Directs Title/Recording/Escrow $50,000 $2,500 1.1% of Directs $50,000 $2,500 1.3% of Directs Interest During Lease-Up $79,000 $4,000 1.8% of Directs $127,000 $6,400 3.3% of Directs TCAC/Syndication Fees $95,000 $4,800 2.2% of Directs $103,000 $5,200 2.7% of Directs Operating Lease-Up/Reserves $71,000 $3,600 1.6% of Directs 574,000 $3,700 1.9% of Directs Total Financing Costs $647,000 $32,400 14.7% of Directs $707,000 $35,400 18.5% of Directs IV. Total Development Costs° $6,798,000 $339,900 $478 Per SF GBA $6,156,000 $307,800 $433 Per SF GBA

VILLAGE / BARRIO - RENTAL

STACKED FLATS OVER

PODIUM PARKING
100% AFFORDABLE
ZZOZ ‘ZZ Lipiel Al T8T Jo SZT aSed
(1) Estimated allowance; not verified by KMA or the City. (2) Based on Building Industry Association (BIA) of San Diego County 2020 Fee Survey. Includes, school, water/sewer, public facilities and traffic development impact fees, plan check, building permit, inspections, and other processing fees.

Prepared by: Keyser Marston Associates, Inc.

Filename i:\Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag (3) Source: City of Carlsbad, CFD No. 1 Information Packet 2020-2021.

Reflects average maximum special tax rate for Developed Property if annexed into the CFD in FY 2020-21.
(4) Excludes acquisition costs.

9% Tax Credits
# Units S/SF S/Month Annual
6 $2.19 $985 $71,000
8 $1.91 $1,050 $101,000
3 $1.67 $1,256 $45,000
1 $0.00 $0 $0
2 $1.46 $1,449 $35,000
$5,250 /Unit/Year ($105,000)
$0 /Unit/Year $0
$500 /Unit/Year ($10,000)
$250 /Unit/Year ($5,000)
$6,000 /Unit/Year ($120,000)

49.8% of EGI
$121,000
TABLE I-3

NET OPERATING INCOME

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
I. Gross Scheduled Income (GS!)
Unit Size # Units $/SF $/Month

Studio @ 50% AMI 450 SF 6 $2.19 $985
One Bedroom @ 50% AMI 550 SF 8 $1.91 $1,050
Two Bedroom @ 50% AMI 750 SF 3 $1.67 $1,256
Two Bedroom Manager 750 SF 1 $0.00 $0
Three Bedroom @ 50% AMI 995 SF 2 $1.46 $1,449
Total/Average

885 SF 20 $1.19 $1,050
Add: Other Income
Total Gross Scheduled Income (GSI)

VILLAGE / BARRIO - RENTAL

STACKED FLATS OVER

PODIUM PARKING
100% AFFORDABLE
ZZOZ `ZZ LI3JetAl
Stacked Flats over Podium Parking
4% Tax Credits w/MHP
Annual
$71,000
$101,000
$45,000
$0
$35,000
$252,000
$10 /Unit/Month $2,000
$254,000
20 $1.19 $1,050 $252,000
$10 /Unit/Month $2,000
$254,000
II. Effective Gross Income
(Less) Vacancy
Effective Gross Income (EGI)
($13,000)
$241,000
($13,000)
$241,000

5.0% of GS! 5.0% of GS!
A." HI. Operating Expenses cr)
3 (Less) Operating Expenses $5,250 /Unit/Year ($105,000) 4ct ..0. (Less) Tenant Services $500 /Unit/Year ($10,000) (Less) Property Taxes 131 $500 /Unit/Year ($10,000)
(Less) Replacement Reserves $500 /Unit/Year ($10,000)
Total Operating Expenses $6,750 /Unit/Year ($135,000)

56.0% of EGI
IV. Net Operating Income {N01) $106,000
(1) See Worksheet 6 for calculation of affordable rents. (2) Assumes project will qualify for tax-exempt status.

Prepared by: Keyser Marston Associates, Inc.

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Total
$1,633,000
$3,973,000
$0
$200,000
$0
$20,000
$5,826,000
Per Unit
$81,700
$198,700
$0
$10,000
$0
$1,000
$291,300
,77 IV. (Less) Acquisition Cost ($3,000,000) ($150,000) CD
3 I* 41.
($3,000,000) ($150,000)
($3,330,000) ($166,500) g V. Financin Deficit ($4,566,000) ($228,300) TABLE J-4

RESIDUAL LAND VALUE AND FINANCING DEFICIT

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
4% Tax Credits with MHP

VILLAGE / BARRIO - RENTAL

STACKED FLATS OVER

PODIUM PARKING
100% AFFORDABLE
9% Tax Credits
ZZOZ `ZZ 113-1e1A1
Stacked Flats over Podium Parking
I. Sources of Funds Total
Supportable Permanent Loan (I) $1,709,000
Tax Credit Equity Investment (2) $2,303,000
Multifamily Housing Program (MHP)13) $1,000,000
Affordable Housing Program (AHP) $200,000
Deferred Developer Fee/General Partner Equity Contribution (41 $0 Income During Lease-Up $20,000
Total Sources of Funds $5,232,000
Per Unit
$85,500
$115,200
$50,000
$10,000
$0
$1,000
$261,600
II. (Less) Development Costs ($6,798,000) ($340,000) ($6,156,000) ($308,000) III. Residual Land Value ($1,566,000) ($78,000) ($330,000) 07,000) in JO LZI aed
Prepared by: Keyser Marston Associates, Inc.

Filename i:\Carlsbad_Prototypes Analysis_v6_15%;4/12/2021;lag Page 78

$0
$5,804,000
($757,000)
$5,047,000
$757,000
$757,000
a $757,000

VILLAGE / BARRIO - RENTAL

STACKED FLATS OVER
TABLE J-4 (CONT'D.) PODIUM PARKING
100% AFFORDABLE

RESIDUAL LAND VALUE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over
Podium Parking
4% Tax Credits with MHP 9% Tax Credits
(1) Supportable Permanent Loan
NOI
Interest Rate
Term (years)
Debt Coverage Ratio
Annual Debt Service
Supportable Permanent Loan

$106,000

4.50%
40 1.15
$92,174
$1,709,000

(2) Low Income Housing Tax Credits (Federal)

Estimate of Eligible Basis:

Total Development Costs

$6,798,000

(Less) Ineligible Costs 6.3% ($426,000) 5.7%
Eligible Basis

$6,372,000

Tax Credit Proceeds:

Maximum Eligible Basis

$6,372,000

(Less) Voluntary Credit Adjustment

0.0% 35.0%
Total Requested Unadjusted Basis

$6,372,000

Impacted Bonus Factor 130% $8,283,600 130%
Tax Credit Qualified Units/Applicable Factor 100% $8,283,600 100% Tax Credit Rate 3.09% $255,963 9.00%
Total Tax Credits @ 10 $2,559,632 10
Limited Partner Share 99.99% $2,559,376 99.99%
Tax Credit Equity Investment @ 90.0% $2,303,000 90.0%
(3) Multifamily Housing Program (MHP)

Restricted Units 20 Units

Total MHP Loan $50,000 /Unit $1,000,000

(4) Estimate of Deferred Developer Fee

Eligible Basis

$6,372,000

(Less) Developer Fee

($831,000)

Unadjusted Eligible Basis

$5,541,000

Total Developer Fee 15.0% $831,000 15.0%
Developer Overhead Fee

$831,000

(Less) Deferred Developer Fee 0.0% $L) 0.0%
Upfront Developer Fee

$831,000

$121,000

5.50%
35 1.15
$105,217
$1,633,000
$6,156,000
($352,000)
$5,804,000
$5,804,000
($2,031,000)
$3,773,000
$4,904,900
$4,904,900
$441,441
$4,414,410
$4,413,969
$3,973,000
Prepared by: Keyser Marston Associates, Inc.

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APPENDIX 5
Viability of 20% Low Income
Inclusionary Requirement
Inclusionary Housing In-Lieu Fee Update
City of Carlsbad
March 22, 2022 Item #4 Page 129 difeffif

APPENDIX 5 — VIABILITY OF 20% INCLUSIONARY SET-ASIDE REQUIREMENT A. Overview
KMA also evaluated the viability of a potential 5% increase to the City's inclusionary set-aside requirement. This Appendix evaluates the feasibility of increasing the inclusionary requirement to 20% Low Income, as well as the corresponding potential in-lieu fee levels, using the same framework and assumptions described in Sections III and IV of this report.

It should be noted that under Assembly Bill 1505, signed into law September 29, 2017, inclusionary ordinances that require more than 15% of total units to be rented by Low Income households are subject to State of California Department of Housing and Community Development (HCD) review. Under AB 1505, HCD may then request that a city provide an economic feasibility study as evidence that a 20% rental inclusionary requirement does not unduly constrain the production of housing. The brief evaluation of the viability of a 20% inclusionary set-aside requirement presented in this Appendix is not intended to meet the criteria established by HCD for an economic feasibility study and therefore should not be treated as such.

B. Viability of 20% Low Income Inclusionary Requirement KMA evaluated the viability of a 20% inclusionary set-aside requirement by comparing: (a) the residual land value generated when assuming the City's existing 15% inclusionary requirement as previously described in Sections III (Citywide) and IV (Village/Barrio), against (b) the residual land value generated when assuming a 20% inclusionary requirement. The methodology used to determine residual land value for the residential development prototypes assuming a 20% inclusionary requirement is described in detail in Sections C and D below.

The results of the 20% Low Income inclusionary analysis for the Citywide residential development prototypes are summarized in Table 1.
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Table 1: Economic Impact of Increasing to 20% Inclusionary Housing Requirement - Citywide

FOR-SALE RENTAL
Garden
Apartments
Average Single-Family Single-Family
Large Lot Medium Lot Townhomes
15% g Low Income

Optimal Approach (1) Off-Site Off-Site Off-Site On-Site

Residual Land Value Per Unit (2) $253,760 $205,760 $115,760 $86,000 $165,320 20% @ Low Income

Optimal Approach (1)
Residual Land Value Per Unit (2)
Off-Site
$240,750
Off-Site
$192,750
Off-Site
$102,750
On-Site
$76,000

$153,060
_
Impact of Increasing to 20% Inclusionary Set-Aside Requirement

Per Market-Rate Unit ($13,010) ($13,010) ($13,010) ($10,000) ($12,260) % Change -5.1% -6.3% -11.2% -11.6% -7.4%
(1) Reflects the optimal approach to fulfilling inclusionary obligation (i.e., on-site vs. off-site production). (2) Reflects residual land value using the optimal approach to fulfilling inclusionary obligation.

KMA used the same approach to analyze the viability of a 20% inclusionary requirement in the Village/Barrio. The results of the 20% Low Income inclusionary analysis for the Village/Barrio residential prototypes are summarized in Table 2.

Table 2: Economic Impact of Increasing to 20% Inclusionary Housing Requirement —Village/Barrio

FOR-SALE RENTAL
Barrio
Perimeter
Stacked
Flats over
Turk-under
Average
Village General Village Center Barrio Center
• Stacked Flatt- r over Tuck-
under _
Mixed-Use
Stacked Flats
Zero Lot
Line
Rowhomes
15% @ Low Income

Optimal Approach (1) Off-Site Off-Site Off-Site On-Site

Residual Land Value Per Unit (2) $262,060 $228,060 $132,060 $78,000 $175,045 20% @ Low Income

Optimal Approach (1) Off-Site
$247,500
Off-Site
$213,500
On-Site
$117,500
On-Site _

Residual Land Value Per Unit (2) $59,500 $159,500
Impact of Increasing to 20% Inclusionary Requirement

Per Market-Rate Unit ($14,560) ($14,560) ($14,560) ($18,500) ($15,545) % Change -5.6% -6.4% -11.0% -23.7% -8.9%
(1) Reflects the optimal approach to fulfilling inclusionary obligation (i.e., on-site vs. off-site production). (2) Reflects residual land value using the optimal approach to fulfilling inclusionary obligation.

As shown in Tables 1 and 2 above, the impact of increasing to a 20% inclusionary requirement was estimated to reduce residual land value for residential projects by an average of -7.4% Citywide and -

8.9% in the Village/Barrio. KMA surveyed land sales that occurred Citywide, in the Village/Barrio, and areas adjacent to the Village/Barrio since 2015. Over time, land values in San Diego County have increased 4% to 5% per year. On this basis, then, it is reasonable to assume that an impact of -7.4% to - 'Keyser Marston Associates, Inc. Page 82
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8.9% could be absorbed in a period of two to three years. Based on the magnitude of this economic impact, it is the KMA preliminary conclusion that a 20% inclusionary set-aside requirement is potentially viable.

C. In-Lieu Fee Financial Analysis — 20% Inclusionary Requirement KMA prepared estimates of potential in-lieu fee levels for a 20% Low Income inclusionary requirement using the same methodology as described in Sections III and IV above.

Approach 1: Economic Impact of Incorporating 20% Affordable Housing On-Site To estimate the economic impact of incorporating a 20% inclusionary housing requirement on-site, KMA prepared financial pro forma models for each Citywide and Village/Barrio residential development prototype assuming: (1) a base case consisting of a 100% market-rate development; and (2) a development that assumes 20% of the units at Low Income. The base case residual land value outcome was then measured against the residual land value that is generated when the 20% Low Income requirement is imposed.

Citywide
The economic impact of incorporating a 20% Low Income inclusionary requirement on-site for the Citywide residential development prototypes is summarized in Table 3.

Table 3: Economic Impact of Incorporating 20% Affordable Housing On-Site - Citywide Residual Land Value Per Unit

FOR-SALE RENTAL
Garden Average
Apartments
Single-Family
Large Lot
Single-Family
Medium Lot
$237,000
T ownhomes
100% Market-Rate $285,000 $147,000 $114,000 $196,000
80% Market-Rate / 20% Low
Income $122,000 $127,000 $76,000 $76,000 $100,000
Economic Impact of Incorporating Affordable Housing On-Site Per Market-Rate Unit $163,000 $110,000 $71,000 $38,000 $96,000 Per Market-Rate Net SF $50.89 $50.00 $44.94 $38.34 $46.04 As shown in Table 3, the economic impact of including 20% Low Income units on-site is estimated to range from $38,000 to $163,000 per unit, or $38 to $51 per SF, of market-rate residential living area for the Citywide prototypes.
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RENTAL FOR-SALE
$74,500
$64.43 $80.39
$96,000 $45,000
$31.50
$110,000
$90.98
$47,000
$54.86
Per Market-Rate Unit
Per Market-Rate Net SF
Table 4: Economic Impact of Incorporating 20% Affordable Housing On-Site — Village/Barrio Residual Land Value Per Unit
100% Market-Rate
80% Market-Rate / 20%
Low Income
Village General
Stacked Flats
over Tuck-under
$297,000
$187,000
Village Center
Mixed-Use
Stacked Flats
$263,000
$167,000
Barrio Center
Zero Lot Line
Rowhomes
$167,000
$122,000
Barrio Perimeter
Stacked Flats
over Tuck-under
$109,000
$62,000
Average
$209,000
$135,000
Economic Impact of Incorporating Affordable Housing On-Site Village/Barrio
KMA used the same methodology to estimate the economic impact of incorporating a 20% Low Income inclusionary requirement on-site in the Village/Barrio. As shown in Table 4, the economic impact of including 20% Low-Income units on-site is estimated to range from $45,000 to $110,000 per unit, or $32 to $91 per SF of market-rate residential living area, in the Village/Barrio.

Approach 2: Funding Level Required to Implement 20% Inclusionary Housing Production in an Off-Site Location
KMA also prepared estimates of the affordability gaps associated with developing 20% affordable housing in an off-site location. The purpose of this financial analysis was to estimate the funding gap that would be required for either a market-rate residential developer or the City to create the targeted 20% inclusionary housing production in a separate off-site location.

As noted previously, a Low Income rental unit developed Citywide has an estimated financing gap of $177,000, and a Low-Income unit developed in the Village/Barrio has an estimated average financing gap of $198,000. In the event that the City were to increase its inclusionary requirement to 20%, the affordability gap per market-rate unit would increase to $44,250 ($177,000 ÷ 80% x 20%) for Low Income units developed Citywide or $49,500 ($198,000 ÷ 80% x 20%) for Low Income units developed in the Village/Barrio, as summarized in Table 5.
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Table 5: Estimate of Funding Gap for 20% Off-Site Low Income Units

Citywide Village and Barrio
Affordability Gap per Affordable Unit $177,000 $198,000 Per Market-Rate Unit
$44,250 $49,500 @ 20% Inclusionary Set-Aside
Citywide
This funding gap outcome can be expressed on both a per-unit basis and per-SF basis relative to the market-rate residential development. As shown in Table 6, KMA estimates that the City would need to receive a fee of $44,250 per market-rate unit, or a per-SF fee ranging between $14 and $45, depending on the market-rate prototype, or an average of $27 per SF living area.

Table 6: Funding Level Required to Create 20% Affordable Housing Off-Site - Citywide

FOR-SALE RENTAL
Garden
Apartments
Average Single-Family
Large Lot
Single-Family
Medium Lot
$44,250
Townhomes
$44,250 Per Market-Rate Unit $44,250 $44,250 $44,250
Per Market-Rate Net SF $13.81 $20.11 $28.01 $44.64 $26.64 Village/Barrio
Likewise, to fund the creation of 20% Low Income units in an off-site location in the Village/Barrio, the City would need to receive $49,500 per market-rate unit, or between $35 to $58 per SF, depending on the market-rate prototype, or an average of $44 per SF living area, as shown in Table 7.

Table 7: Funding Level Required to Create 20% Affordable Housing Off-Site — Village/Barrio

FOR-SALE RENTAL
Average Village General Village Center Barrio Center Barrio Perimeter Stacked Flats
over Tuck-under
$49,500
Mixed-Use
Stacked Flats
Zero Lot Line
Rowhomes
$49,500
Stacked Flats
over Tuck-under
Per Market-Rate Unit $49,500 $49,500 $49,500
Per Market-Rate Net SF. $40.94 $41.45 $34.65 $57.78 $43.71 'Keyser Marston Associates, Inc.

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Table 9: Potential Fee Level — 20% Low Income — Village/Barrio

Approach 1:

On-Site Production
Approach 2:

Off-Site Production
Potential
Fee Levels
Per Market-Rate Unit
$45,000 - $117,000
Average: $75,500
$49,500 $49,500
Per Net SF Market-Rate
Residential
$32 - $91
Average: $64
$35 - $58
Average: $44
$30 - $40
D. Potential Fee Levels
Citywide
In view of Approaches 1 and 2, if the City seeks to increase the inclusionary requirement to 20%, it may wish to consider a potential in-lieu fee Citywide of $44,250 per market-rate unit, or between $20 and $30 per SF of market-rate residential living area, as summarized in Table 8.

Table 8: Potential Fee Level — 20% Low Income - Citywide

Approach to Setting Fee Levels
Potential
Fee Levels
Approach 1:

On-Site Production
Approach 2:

Off-Site Production
Per Market-Rate Unit
$38,000 - $163,000
Average: $96,000
$44,250 $44,250
Per Net SF Market-Rate
Residential
$38 - $51
Average: $46
$14 - $45
Average: $27
$20 - $30
Village/Barrio
Likewise in view of Approaches 1 and 2, if the City seeks to increase the inclusionary requirement to 20%, it may wish to consider a potential in-lieu fee in the Village/Barrio of $49,500 per market-rate unit, or between $30 and $40 per SF of market-rate residential living area, as summarized in Table 9.

E. Conclusions
Table 10 provides a summary of the economic impact of a potential 5% increase to the City's inclusionary set-aside requirement.
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Table 10: Economic Impact of Increasing Inclusionary Requirement from 15% to 20%

Citywide Village/Barrio
Impact on Residual Land Value -7.4% -8.9%
As shown above, the impact of increasing the inclusionary requirement from 15% to 20% was estimated to reduce residual land value for residential projects by an average of -7.4% Citywide and -8.9% in the Village/Barrio. KMA surveyed land sales that occurred Citywide, in the Village/Barrio, and areas adjacent to the Village/Barrio since 2015. Overtime, land values in San Diego County have increased 4% to 5% per year. On this basis, then, it is reasonable to assume that an impact of -7.4% to -8.9% could be absorbed in a period of two to three years.

KMA also prepared estimates of potential in-lieu fee levels in the event that the City increases the inclusionary requirement to 20%. These estimated ranges were based on the two approaches to setting fee levels (on-site vs. off-site production) described in detail in Sections III and IV of this report. Based on these in-lieu fee financial analyses, should the City establish a 20% Low Income inclusionary requirement, it may wish to consider a potential in-lieu fee between $20 and $30 per SF of market-rate residential living area Citywide and a potential fee level between $30 and $40 per SF of market-rate residential living area in the Village/Barrio. These findings are summarized in Table 11 below.

Table 11: Potential Fee Levels — 20% Low Income

Citywide Village/Barrio
Per Market-Rate Unit $44,250 $49,500
Per Net SF Market-Rate Unit $20 - $30 $30 - $40
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I. PROJECT DESCRIPTION

Site Area 10.00 Acres 5.00 Acres 3.00 Acres 5.00 Acres 2.00 Acre Density - Residential 3.2 Units/Acre 6.0 UnIts/Acre 15.0 Units/Acre 25.0 Units/Acre 30.0 Units/Acre Number of Units 32 Units 30 Units 45 Units 125 Units 60 Units Average Unit Size 3,203 SF 2,200 SF 1,580 SF 991 SF 885 SF Retail SF

Parking Ratio 2.00 Spaces/Unit 2.00 Spaces/Unit 2.27 Spaces/Unit 2.13 Spaces/Unit 1.53 Spaces/Unit II. DEVELOPMENT COSTS
Off-Site Improvements $3 /SF Site $3 /SF Site $5 /SF Site $5 /SF Site $5 /SF Site On-Site Improvements $8 /SF Site $8 /SF Site $10 /SF Site $10 /SF Site $10 /SF Site Parking

$15,000 /Space
Shell Construction - Residential $150 /SF GBA $160 /SF G8A $175 /SF GBA $170 /SF GBA $170 /SF GBA Shell Construction - Retail

FF&E/Amenities $15,000 /Unit $10,000 /Unit $7,500 /Unit $10,000 /Unit $2,500 /Unit Architecture & Engineering 7.0% of Directs 7.0% of Directs 7.0% of Directs 7.0% of Directs 5.0% of Directs Permits and Fees - Residential $45,000 /Unit $45,000 /Unit $24,000 /Unit $17,000 /Unit $18,000 /Unit Permits and Fees - Retail

Total Development Costs - Excl. Land $293 /SF GBA $308 /SF GBA $309 /SF GBA $294 /SF GBA $388 /SF GBA ts. rs.

III. MARKET-RATE SALES PRICES / RENTS
Unit SF $/SF Sales Price Unit SF 1/2. Sales Price Unit SF ILEE. Mo. Rent Unit SF LE Mo.jRent Unit SF $/SF Sales Price Studio

One Bedroom

750 $3.00 $2,250 750 $1.40 $1,050
Two Bedroom

1,400 $480 $672,000 1,000 $2.75 $2,750 950 $1.32 $1,256 Three Bedroom 3,000 $450 $1,350,000 2,000 $500 $1,000,000 1,700 $460 $782,000 1,350 $2.50 $3,380 1,100 $1.32 $1,449 Four Bedroom 3,509 $425 $1,488,000 2,500 $450 $1,125,000

IV. RETAIL SPACE
Retail
Retail Cap Rate
V. RESIDUAL LAND VALUE
Cost of Sale
Target Developer Profit ------ ------------------- - Residual Land Value

3.0% of Value

10.0% of Value -----------

$9,117,000

3.0% of Value

10.0% of Value --------

$7,103,000

3.0% of Value
---- 10.0% of Value-----
$6,609,000 $14,216,000
Per Unit $285,000 $237,000 $147,00
5 0
$1

Per SF Site Area $21 $33

$65
($10,620,C00)
($177,000)
0 Cc
Financing Gap
Per unit

V. FINANCING GAP

CITYWIDE
TABLE 1
80% MARKET-RATE / 20% @ LOW

KEY ASSUMPTIONS - CITYWIDE PROTOTYPES

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
A

CITYWIDE
111 Reflects affordability gap per affordable snit, inclusive of land acquisition costs.

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filename liNCarlsbad2rotolypes Analysis_v60%;4/12/2021;lag

VILLAGE AND BARRIO
TABLE 2
80% MARKET-RATE I 20% @ LOW

KEY ASSUMPTIONS - VILLAGE AND BARRIO PROTOTYPES

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
7CITY OF CARLSBAD

VILLAGE AND BARRIO

100% MARKET-RATE 100% AFFORDABLE
iIIjge *tack ti v rlkKkon r VIII e Mixe Us a r turn Barrio Rowbomes arri St ck Ft ts v r Tuck un or Stacked FIats over PodIum I. PROJECT DESCRIPTION

Site Area
Density - Residential
Number of Units
Average Unit Size
Retail SF
Parking Ratio

0.50 Acres

23.0 Units/Acre
11 Units
1,209 SF
-

1.82 Spaces/Unit

0.50 Acre

35.0 Units/Acre
17 Units
1,194 SF
3,000 SF

1.76 Spaces/Unit

0.50 Acre

14.0 Units/Acre
7 Units
1,429 SF
---

2.29 Spaces/Unit

0.50 Acre

30.0 Units/Acre
1$ Units
857 SF
---

1.80 Spaces/Unit

0.50 Acre

40.0 Units/Acre
20 Units
60$ SF
-

1.15 Spaces/Unit
II. DEVELOPMENT COSTS
Off-Site Improvements
On-Site improvements
Parking
Shell Construction - Residential
Shell Construction - Retail
FF&E/Amenities
Architecture & Engineering
Permits and Fees - Residential
Permits and Fees - Retail
Total Development Costs - Excl. Land
$0 /SF Site
$15 /SF Site
S15,000 /Space
$190 /SF GBA
-
$7,500 /Unit

5.0% of Directs
$18,000 /Unit
.._
$360 /SF GSA
$0 /SF Site
$15 /SF Site
$30,000 /Space
$200 /SF GBA
$150 /SF GBA-Retail
$7,500 /Unit

5.0% of Directs
$18,000 /Unit
$11 /SF GBA-Retail
$377 /SF GBA
$0 /SF Site
$10 /SF Site
-
$195 /SF GBA
---
$7,500 /Unit

5.0% of Directs
$24,000 /Unit
---
$329 /SF GBA
$0 /SF Site
$10 /SF site
$15,000 /Space
$185 /SF GBA
---
$5,000 /Unit

5.0% of Directs
$18,000 /Unit
-
$325 /SF GBA
$0 /51 Site
$15 /SF Site
$30,000 /Space
$180 /SF GSA
---

$3,500 /Unit

5.0% of Directs
$18,000 /Unit
---

$478 /SF GBA
III. MARKET-RATE SALES PRICES/ RENTS
Studio
One Bedroom
Two Bedroom
Three Bedroom
Four Bedroom
Unit SF $/$F Sales Price Unit SF $/$F Sales Price Unit SF $/SF Sales Price Unit SF S/SF Mo. Rent Unit SF 5/SF Mo. Rent --- --- ---
950 $800 $760,000
1,200 $775 $930,000
1,500 $750 $1,125,000
- - -
--- -- ---
950 $785 $746,000
1,200 $765 $918,000
1,500 $750 $1,125,000
- --- -
-- - -
- --- ---
1,250 $550 $688,000
1,500 $500 $750,000
- --- ---
- - --
750 $3.60 $2,700
950 $3.30 $3,140
--- - -
- ---
450 $2.19 $955
550 $1.91 $1,050
750 $1.8 7 $1,256
995 $1.46 $1,449
--- --- ---

IV. RETAIL SPACE
Retail Rent
Retail Cap Rate
--
-
5a.so

6.5%

-
---
-
---

V. RESIDUAL LAND VALUE
Cost of Sale
Target Developer Profit
Residual Land Value
Per Unit
Per SF Site Area

3.0% of Value

12.0% of Value
$3,269,000
$297,000
$150

3.0% of Value

12.0% of Value
$4,477,000
$263,000
$206

3.0% of Value

10.0% of Value
$1,169,000
$167,000
$54
-
---
$1,637,000
$109,000
$75
-
- ---

---

--

---

VI. FINANCING GAP
Financing Gap
. Per Unit
-
- --
--
--
--
-
($3,960,000) 111
0198,000
ill Reece affoiciability gap per affordable unit, inclusive of land acquisition costs.

Prepared by: Keyser Marston Associates, Inc. Page 89
Filena-ne it\ Carisbrid_Prototypes Analysis...4_208'4:4/12/2021;in as
ft
a
a

100% Market-Rate and Mixed-Income 100% Affordable
Single-Family Detached
Large Lot

10.00 Acres

3.2 Units/Acre
32 Units
2 Stories

RENTAL FOR-SALE
100% @ Market-Rate
$285,000/Unit $21/SF
80% @ Market-Rate
20% @ Affordable 02)
$122,000/Unit $9/SF
rD
3 Garden
Apartments

5.00 Acres

25.0 Units/Acre
125 Units
3 Stories
Stacked Flats over
Tuck-under Parking

2.00 Acres

30.0 Units/Acre
60 Units
3 Stories
100% @ Market-Rate
$114,000/Unit $65/SF
80% @ Market-Rate
20% @ Affordable (1)(3)
$76,000/U nit $44/SF
100% Affordable
w/4% Tax Credits (4)
($177,000)/Unit ($122)/SF
Single-Family Detached
Medium Lot

5.00 Acres

6.0 Units/Acre
30 Units
2 Stories
100% @ Market-Rate
$237,000/Unit $33/SF
80% @ Market-Rate
20% @ Affordable 15)121
$127,000/Unit $17/SF
Townhomes

3.00 Acres

15.0 Units/Acre
45 Units
2 Stories
100% @ Market-Rate
$147,000/Unit $51/SF
80% @ Market-Rate
20% @ Affordable tip
$76,000/Unit $26/SF

CITYWIDE
TABLE 3 80% MARKET-RATE / 20% @ LOW

SUMMARY OF DEVELOPMENT SCENARIOS AND RESIDUAL LAND VALUE - CITYWIDE

EINCLUSIONARY HOUSING IN-LIEU FEE UPDATE
cu CITY OF CARLSBAD

CITYWIDE
0 —h
CO
(1) Affordability not to exceed 80% Area Median Income (AM!). (2) Assumes maximum ownership payment at 30% of 80% AMI, adjusted for family size. (3), Assumes maximum rental payment at 30% of 70% AMI, adjusted for family size. (4) Reflects affordability gap per affordable unit, inclusive of land acquisition costs.

Prepared by: Keyser Marston Associates, Inc.

Filename: \ Carlsbad_Prototypes Analysis_v6_20%;4/12/2021;lag

100% Affordable
Village / Barrio
Stacked Flats over
Podium Parking 0)

0.50 Acres

40.0 Units/Acre
20 Units
3 Stories
100% Affordable
W/ Tax Credits (5)
($198,000)/Unit ($182)/SF

0.50 Acres

15.0 Units/Acre
7 Units
3 Stories
100% @ Market-Rate
$167,000/Unit $54/SF

0.50 Acres

23.0 Units/Acre
11 Units
3 Stories
100% @ Market-Rate
$297,000/Unit $150/SF

0.50 Acres

35.0 Units/Acre
17 Units
4 Stories
100% @ Market-Rate
$263,000/Unit $206/SF
100% @ Market-Rate
......... V-- ........ ________ ...... ^
$109,000/Unit $75/SF

VILLAGE AND BARRIO
80% MARKET-RATE / 20% @ LOW
TABLE 4
SUMMARY OF DEVELOPMENT SCENARIOS AND RESIDUAL LAND VALUE - VILLAGE AND BARRIO a) —s INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
=CITY OF CARLSBAD
NJ

NJ VILLAGE AND BARRIO
NJ
1•.)

FOR-SALE RENTAL
100% Market-Rate I Mixed-Income
Village Center Barrio Center Barrio Perimeter
Tuck under Parking
Stacked.FlatS Over Stacked Flats over Rowhomes
Podium Parking
Mixed-Use Zero Lot Line
Village General
Stacked Flats over
Tuck-under Parking

0.50 Acres

30.0 Units/Acre
15 Units
3 Stories
rD

80% @ Market-Rate 80% @ Market-Rate 80% @ Market-Rate 80% @ Market-Rate

20% @ Affordable (2)(3) --------------------------

20% @ Affordable (2)(3) 20% @ Affordable (2)(3)

20% ® Affordable (21(4) ....... _ ..................

$187,000/Unit $95/SF $167,000/Unit $130/SF $122,000/Un it $39/SF

$62,000/Unit $43/SF

41. 0 —h (1) Assumes development will qualify for an affordable housing density bonus. 00(2) Affordability not to exceed 80% Area Median Income (AMI). 1—a(3) Assumes maximum ownership payment at 30% of 80% AMI, adjusted for family size. (4) Assumes maximum rental payment at 30% of 70% AM I, adjusted for family size. (5) Reflects average affordability gap per affordable unit for two alternative financing approaches (4% Tax Credits and 9% Tax Credits).

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Prototypes Analysis_v6_20%;4/12/2021;lag

VILLAGE AND BARRIO
80% MARKET-RATE / 20% @ LOW
VS. 85% MARKET-RATE / 15% @ LOW
TABLE 6
ECONOMIC IMPACT OF INCREASING TO 20% INCLUSIONARY HOUSING REQUIREMENT- VILLAGE AND BARRIO INCLUSIONARY HOUSING IN-LIEU FEE UPDATE = CITY OF CARLSBAD

FOR-SALE RENTAL

Village General Village Center Barrio Center Barrio Perimeter — Stacked Flats over
Tuck-under Parking _
Mixed-Use Stacked Flats
over Podium Parking
Zero Lot Line
Rowhomes
Stacked Flats over
Tuck-under Parking

1. Residual Land Value - Optimal Approach:

On-Site vs. Off-Site Production
A. 85% Market-Rate / 15% Low
Per Unit $262,060
Off-Site
$228,060
Off-Site
$132,060
Off-Site
$78,000
On-Site
B. 80% Market-Rate / 20% Low
Per Unit $247,000
Off-Site
$213,000
Off-Site
$117,000
On-Site
$59,000
On-Site
II. Impact of Increasing to 20% Inclusionary
Requirement
Per Market-Rate Unit
Per Market-Rate Net SF
.-7 Per SF Site Area ro
2 % Chow: % Change % Change %Change
($15,060) -5.7%
($12.46)
($7.61)
($15,060) -6.6%
($12.61)
($11.75)
($15,060) -11.4%
($10.54)
($4.84)
($19,000) -24.4%
($22.18)
($13.09)
I8T Jo 'DI aed
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Filename i:\Carlsbad_Prototypes Ana lysis_y6_20%;4/12/2021;lag Page 92

% Change
($96,000) -49.0%
($46.04)
($18.35)

CITYWIDE
80% MARKET-RATE / 20% @ LOW
TABLE 7
a) ESTIMATE OF POTENTIAL 1N-LIEU FEE - APPROACH 1: ECONOMIC IMPACT OF INCORPORATING AFFORDABLE HOUSING ON-SITE - CITYWIDE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
A 13

CITYWIDE

FOR-SALE RENTAL

Single-Family Detached
Large Lot
Single-Family Detached
Medium Lot Townhomes Garden Apartments
I. Residual Land Value
A. 100% Market-Rate
Per Unit $285,000 $237,000 $147,000 $114,000
B. 80% Market-Rate / 20% Low
Per Unit $122,000 $127,000 $76,000 $76,000
II. Economic Impact of Incorporating
Affordable Housing On-Site
Per Market-Rate Unit
Per Market-Rate Net SF
Per SF Site Area
% Change % Change % Change % Chanae
($163,000) -57.2%
($50.89)
($11.97)
($110,000) -46.4%
($50.00)
($15,15)
($71,000) -48.3%
($44.94)
($24.45)
($38,000) -33.3%
($38.34)
($21.81)
Co
3 T8T Jo Ziff aSed
Prepared by: Keyser Marston Associates, Inc.

Filename i:\Carlsbad_Prototypes Analysis_y6_20%;4/12/2021;1ag

($77,000)
f$100,0001
($177,000)
Average
($44,000)

Single-Family Detached
Large Lot
Single-Family Detached
Medium Lot Townhomes Garden Apartments
I. Affordability Gap

A. Residual Land Value per Affordable Unit Ill ($77,000) ($77,000) ($77,000) ($77,000) B. Acquisition Costs (2) ($100,000) ($100,000) ($100,000) ($100,000) C. Affordability Gap per Affordable Unit ($177,000) ($177,000) ($177,000) ($177,000) II. Funding Level Required for Inclusionary Housing

Production Off-Site
Affordability Gap per Market-Rate Unit @ 20% Low 131 ($44,000) ($44,000) ($44,000) ($44,000) III. Economic Impact of Inclusionary Housing
Production Off-Site % Change % Change 'I.,:Chancre % Change A. Residual Land Value - 100% Market-Rate $285,000

$237,000

$147,000

$114,000

B. Residual Land Value less Affordability Gap $241,000

$193,000

$103,000

$70,000

Per SF Site Area $17.70

$26.58

$35.47

$40.17

C. Economic Impact of Off-Site Inclusionary Housing

Per Market-Rate Unit ($44,000) -15.4% ($44,000) -18.6% ($44,000) -29.9% ($44,000) -38.6% Per Market-Rate Net SF ($13.74)

($20.00)

($27.85)

($44.39)

Per SF Site Area ($3.23)

($6.06)

($15.15)

($25.25)

ft)
3 % Change
$195,750
$151,750
$35.14
($44,000) -22.5%
($26.49)
($12.42)

CITYWIDE
80% MARKET-RATE / 20% @ LOW
TABLE 8
ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 2: FUNDING LEVEL REQUIRED FOR INCLUSIONARY HOUSING PRODUCTION OFF-SITE - CITYWIDE a)

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
=CITY OF CARLSBAD
NJ
..1>)
NJ
CD NJ
NJ
A

CITYWIDE

FOR-SALE RENTAL

w (1) Residual land value for 100% affordable stacked flats over tuck-under parking; see Attachment E. 0 (2) KMA estimate based on recent experience in North County coastal areas. —'s(3) Assumes inclusionary requirement applied to total number of market-rate units approved [i.e., (gap 80%) x 20%1. 00 Prepared by: Keyser Marston Associates, Inc.

Filename i:Wansbad_Prototypes Analysls_y6_20%;4/12/2021;lag

NJ
NJ
NJ 0 NJ
NJ
Potential In-Lieu Fee: $20 - $30/Net SF

FOR-SALE RENTAL
Single-Family Detached
Large Lot
Garden Apartments Single-Family Detached
Medium Lot Townhomes
A

CITYWIDE
Average
I. Mixed Income - Optimal Approach
On-Site vs. Off-Site
A. Residual Land Value - Per SF Site Area
B. Developer Profit (% of Value)
C. Total Development Costs - Per Net SF ill
$18
Off-Site

10.0%
$382

$27
Off-Site

10.0%
$415

$35
Off-Site

10.0%
$406

$44
On-Site

10.0%
$411

II. In-Lieu Fee @ $20/Net SF
A. Residual Land Value-Per SF Site Area $16
% Change,
$27
94p_ag_7 e
-0.1% $40
% Chanzie
$54
% Chan( e
-7.0% 11.9% 23.2%
B. Developer Profit (% of Value) 5.7% -4.3% 5.8% -4.2% 5.7% -.4.3').5 5.7% -4.3% C. In-Lieu Fee as % of Development Costs 5.2%.

4.8%

4.9%

4.9%

III. In-Lieu Fee @ $30/Net SF

%Oaie

% Change

% Change

% Change.

A. Residual Land Value - Per SF Site Area $14 -20.3% $24 -1/.5% $34 -3.4% $48 10.2% B. Developer Profit (% of Value) 3.4% -6.6% 3.7% -6.3% 3.6% -6.4% 3.6% -6.4% C. In-Lieu Fee as % of Development Costs 7.9%

7.2%

7.4%

7.3%

rD
3 Approach 1: Economic Impact of Incorporating Affordable Housing On-Site Residual Land Value

Per Unit $122,000 $127,000 $76,000 $76,000
Per SF Site Area $9 $17 $26 $44
Approach 2: Funding Level Required for Inclusionary Housing Production Off-Site $193,000 $103,000 $70,000
Residual Land Value
Per Unit $241,000
Per SF Site Area $18 $27 $35 $40
20% LOW
$100,000
$24
$152,000
$30
$30

10.0%
$404
Change
$34 13.9%

5.7% -4.3%

5.0%
%Change
$30 0.1%

3.6% -6.4%

7.4%

CITYWIDE
TABLE 9 80% MARKET-RATE / 20% @ LOW

IMPACT OF POTENTIAL IN-LIEU FEE ON PROJECT FEASIBILITY - CITYWIDE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
tu CITY OF CARLSBAD
(1) Reflects total developments costs inclusive of residual land value.

Prepared by: Keyser Marston Associates, Inc.

Filename: \ Ca risbad_Prototypes Analysis_v6_20%;4/12/2021;iag

VILLAGE AND BARRIO
80% MARKET-RATE / 20% @ LOW
TABLE 10
0, ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 1: ECONOMIC IMPACT OF INCORPORATING AFFORDABLE HOUSING ON-SITE - VILLAGE AND BARRIO

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
-CITY OF CARLSBAD
N.)
NJ I-1 1 NJ

FOR-SALE RENTAL

Village General Village Center Barrio Center Barrio Perimeter Stacked Flats over
Tuck-under Parking
Mixed Use Stacked Flats
over Podium Parking
Zero Lot Line
Rowhomes
Stacked Flats over
Tuck-under Parking
I. Residual Land Value
A. 100% Market-Rate
Per Unit $297,000 $263,000 $167,000 $109,000
B. 80% Market-Rate / 20% Low
Per Unit $187,000 $167,000 $122,000 $62,000
II. Economic Impact of Incorporating
Affordable Housing On-Site
Per Market-Rate Unit
Per Market-Rate Net SF
Per SF Site Area
% Change %Change %Change %Change
($110,000) -37.0%
($90.98)
($55.56)
($96,000) -36.5%
($80.39)
($74.93)
($45,000) -26.9%
($31.50)
($14.46)
($47,000) -43.1%
($54.86)
($32.37)
In 10 SVC aed
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Filename i:\Carlsbad_Prototypes Analysis_v6_20%;4/12/2021;lag Page 96

RENTAL FOR-SALE
($50,000) ($50,000) ($50,000) ($50,000)
II. Funding Level Required for Inclusionary Housing
Production Off-Site
Affordability Gap per Market-Rate Unit @ 20% Low
Village General
Stacked Flats over
Tuck-under Parking
Barrio Perimeter
Stacked Flats over
Tuck-under Parking
Barrio Center
Zero Lot Line
Rowhomes
Village Center
Mixed-Use Stacked Flats
over Podium Parking
($48,000)
($150,000)
($198,000)
($48,000)
($150,000)
($198,000)
($48,000)
(5150,000)
($198,000)
($48,000)
($150,000)
($198,000)
I. Affordability Gap
A. Residual Land Value per Affordable Unit Ill
B. Acquisition Costs (7)
C. Affordability Gap per Affordable Unit
Average
($48,000)
($150,000)
($198,000)
($50,000)
III. Economic Impact of Inclusionary Housing
Production Off-Site % Change 96 Change

% Change

% Change
A. Residual Land Value - 100% Market-Rate $297,000

$263,000

$167,000

$109,000

B. Residual Land Value less Affordability Gap $247,000

$213,000

$117,000

$59,000

Per SF Site Area $124.75

$166.25

$37.60

$40.63

C. Economic Impact of Off-Site Inclusionary Housing

Per Market-Rate Unit ($50,000) -16.8% ($50,000) -19.0% ($50,000) -.29.9% ($50,000) -45.9%

Per Market-Rate Net SF ($41.35)

($41.87)

($35.00)

($58.37)

Per SF Site Area ($25.25)

($39.03)

($16.07)

($34.44)

co
3 % Change
$209,000
$159,000
$92
________ .........
(550,000) -23.9%
($44.15)
($28.70)

VILLAGE AND BARRIO
80% MARKET-RATE / 20% @ LOW
TABLE 11
ESTIMATE OF POTENTIAL IN-LIEU FEE - APPROACH 2: FUNDING LEVEL REQUIRED FOR INCLUSIONARY HOUSING PRODUCTION OFF-SITE - VILLAGE AND BARRIO C1.>

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE
D.-CITY OF CARLSBAD
NJ
a)
CD
0')
01 Reflects average residual land value for two alternative financing approaches (4% Tax Credits and 9% Tax Credits). Assumes development of 100% affordable stacked flats over podium parking; see Attachment J. (2) KMA estimate based on recent experience in North County coastal areas. (3) Assumes inclusionary requirement applied to total number of market-rate units approved [i.e., (gap 80%) x 20%].

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Filename iACarlsbad_Prototypes Analysis_v6_20%;4/12/2021;lag Page 97

FOR-SALE RENTAL
I. Optimal Approach: On-Site vs. Off-Site
Production
A. Residual Land Value - Per SF Land
B. Developer Profit (% of Value)
C. Total Development Costs - Per Net SF 0.)
$125
Off-Site

12.0%
$657
$166
Off-Site

12.0%
$720
$39
On-Site

10.0%
$446
$43
On-Site

12.0%
$499
II. In-Lieu Fee @ $30/Net SF % Change %Orme % Change .',.haige A. Residual Land Value - Per SF Land $132 5.6% $178 6.8% $40 2.1% $57 33.5% B. Developer Profit (% of Value) 8.1% -3.9% 8;5% -3.5% 4.2% -5.9% 6.9% -5.1% C. In-Lieu Fee as % of Development Costs 4.6% 4.2% 6.7% 6.0% III. In-Lieu Fee @ $40/Net SF % Change 96 Change % Change % Change A. Residual Land Value - Per SF Land $126 0.7% $168 1.2% $35 -9.6% $52 19.9% ,
B. Developer Profit (% of Value) 6.8% -5.2% 7.3% -4.7% 2.2% -7.8% 5.2% -6.8% C. In-Lieu Fee as % of Development Costs 6.1% 5.6% 9.0% 8.0% Potential In-Lieu Fee: $30 - $40/Net SF Ft

VILLAGE AND BARRIO
NJ
N.)
NJ
NJ
N.)
Stacked Flat over :
"Tack--attd,er Peeking
$93

11.5%
$581
% Change
$102 9.0%

6.9% -4.6%

4.9%
% change
$95 2.1%

5.4% -6.1%

6.6%
20% LOW
Approach 1: Economic Impact of Incorporating Affordable Housing On-Site Residual Land Value

Per Unit $187,000 $167,000 $122,000

$62,000
Per SF Site Area $95 $130 $39

$43
....... ..... ...... ........... ...... ..... ........ ........

..... -^ .........

Approach 2: Funding Level Required for inclusionary Housing Production Off-Site

Residual Land Value

Per Unit $247,000 $213,000 $117,000

$59,000
Per SF Site Area $125 $166 $38

$41
............

Average
$135,000
$77
_ ........ ....
$159,000
$92

VILLAGE AND BARRIO
TABLE 12 80% MARKET-RATE / 20% @ LOW

IMPACT OF POTENTIAL IN-LIEU FEE ON PROJECT FEASIBILITY - VILLAGE AND BARRIO

EINCLUSIONARY HOUSING IN-LIEU FEE UPDATE
co CITY OF CARLSBAD
(1) Reflects total developments costs inclusive of residual land value.

Prepared by: Keyser Marston Associates, Inc.

Filename:Warlsbad_Prototypes Analysis_v6_20%;4/12/2021;lag

APPENDIX 6
Estimate of Affordable Sales Prices and Rents
Inclusionary Housing In-Lieu Fee Update
City of Carlsbad
March 22, 2022 !tern #4 Page 148 efen

WORKSHEET 1
ESTIMATE OF AFFORDABLE SALES PRICES - SINGLE-FAMILY DETACHED-LARGE LOT (1)

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
A
Single Family Detached - Large Lot
Three Bedroom

Four Bedroom

I. Maximum Affordable Sales Price (2)

Percent of AMI

80%

80%
Assumed Family Size

5.0 7.0
Household Income

$99,800

$114,600
Income Allocation to Housing

30%

30%
Amount Available for Housing

$29,940

$34,380
Annual HOA (3) $200 /Mo. $2,400 $250 /Mo. $3,000
Annual Utilities (4)

$1,332

$1,560
Tax Rate

1.20%

1.20%
Annual Taxes (5)

$4,716

$5,364
Available for Mortgage

$21,492

$24,456
Interest Rate (6)

4.50%

4.50%
Down Payment

10.00%

10.00%
Supportable Mortgage

$353,474

$402,222
Add: Down Payment

$39,300

$44,700
Maximum Unit Price

$393,000

$447,000
(1) Based on 2020 income limits published by the State of California Department of Housing and Community and Development (HCD). (2) Based on affordable housing allowable housing expenses as defined in Section 21.85.020.4 of the Carlsbad Municipal Code. (3) Allowance for structure insurance, maintenance, and reserves. (4) Per the City of Carlsbad Utility Allowance Schedule, effective December 1, 2019, Rev. January 28, 2020. KMA assumed utility profile as follows:

Number of Bedrooms: Three Four
Gas Heat $14 $18
Gas Cooking $10 $13
Other Electric $14 $18
Gas Water Heater $14 $18
Water $24 $28
Sewer $16 $16
Trash $19 $19
Total Utility Allowance $111 $130
Total Annual Utilities $1,332 $1,560
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual home. (6) KMA assumption based on data provided by Bankrate.com, June 2020; includes Private Mortgage Insurance (PMI).

Prepared by: Keyser Marston Associates, Inc.

FilenarPIZIaNhsaa Pliat4pes Analysis_v6_15%; 4/12/2021; lag Item #4 Page 149Fisitelgl

WORKSHEET 2
ESTIMATE OF AFFORDABLE SALES PRICES - SINGLE-FAMILY DETACHED-MEDIUM LOT (1)

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Single Family Detached - Medium Lot
Three Bedroom
I. Maximum Affordable Sales Price (2)
Percent of AMI 80%
Assumed Family Size 5.0
Household Income $99,800
Four Bedroom
80%

7.0 $114,600
30%
$34,380
Income Allocation to Housing 30%
Amount Available for Housing $29,940
Annual HOA 13) $200 /Mo. $2,400
Annual Utilities (4) $1,332
Tax Rate 1.20%
Annual Taxes (5) $4,716
Available for Mortgage $21,492
$250 /Mo. $3,000
$1,560

1.20%
$5,364
$24,456

4.50%

10.00%
$402,222
$44,700
Interest Rate (6) 4.50%
Down Payment 10.00%
Supportable Mortgage $353,474
Add: Down Payment $39,300
Maximum Unit Price $393,000

$447,000

(1) Based on 2020 income limits published by the State of California Department of Housing and Community and Development (HCD). (2) Based on affordable housing allowable housing expenses as defined in Section 21.85.020.A of the Carlsbad Municipal Code. (3) Allowance for structure insurance, maintenance, and reserves. (4) Per the City of Carlsbad Utility Allowance Schedule, effective December 1, 2019, Rev. January 28, 2020. KMA assumed utility profile as follows:

Number of Bedrooms: Three Four
Gas Heat $14 $18
Gas Cooking $3.0 $13
Other Electric $14 $18
Gas Water Heater $14 $18
Water $24 $28
Sewer $16 $16
Trash

$19
Total Utility Allowance $111 $130
Total Annual Utilities $1,332 $1,560
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual home. (6) KMA assumption based on data provided by Bankrate.com, June 2020; includes Private Mortgage Insurance (PMI).

Prepared by: Keyser Marston Associates, Inc.

FilenarMaNbsa agat4es Analysis_v6_15%; 4/12/2021; lag Item #4 Page 150Ftite1W1

WORKSHEET 3
ESTIMATE OF AFFORDABLE SALES PRICES - TOWNHOMES (1)

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Townhomes
Two Bedroom

Three Bedroom

I. Maximum Affordable Sales Price (2)

Percent of AM)

80%

80%
Assumed Family Size

3.0 5.0
Household Income

$83,200

$99,800
Income Allocation to Housing

30%

30%
Amount Available for Housing

$24,960

$29,940
Annual HOA (3) $350 /Mo. $4,200 $400 /Mo. $4,800
Annual Utilities (4)

$1,212

$1,332
Tax Rate

1.20%

1.20%
Annual Taxes (s)

$3,516

$4,284
Available for Mortgage

$16,032

$19,524
Interest Rate (6)

4.50%

4.50%
Down Payment

10.00%

10.00%
Supportable Mortgage

$263,675

$321,107
Add: Down Payment

$29,300

$35,700
Maximum Unit Price

$293,000

$357,000
(1) Based on 2020 income limits published by the State of California Department of Housing and Community and Development (HCD). (2) Based on affordable housing allowable housing expenses as defined in Section 21.85.020.A of the Carlsbad Municipal Code. (3) Allowance for structure insurance, maintenance, and reserves. (4) Per the City of Carlsbad Utility Allowance Schedule, effective December 1, 2019, Rev. January 28, 2020. KMA assumed utility profile as follows:

Number of Bedrooms: Two Three
Gas Heat $12 $14
Gas Cooking $8 $10
Other Electric $12 $14
Gas Water Heater $12 $14
Water $22 $24
Sewer $16 $16
Trash $_L.9 $19
Total Utility Allowance $101 $111
Total Annual Utilities $1,212 $1,332
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual home. (6) KMA assumption based on data provided by Bankrate.com, June 2020; includes Private Mortgage Insurance (PMI).

Prepared by: Keyser Marston Associates, Inc.

FilenarMatals122,1424pes Analysis_v6_15%; 4/12/2021; lag Item #4 Page 151%MM

WORKSHEET 4

ESTIMATE OF AFFORDABLE RENTS - GARDEN APARTMENTS / STACKED FLATS OVER TUCK-UNDER PARKING

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
D/1
Garden Apartments
Stacked Flats over Tuck-Under Parking
Number of Bedrooms 0 1 2 3
A. City of Carlsbad
70%

1.0 $56,650
30%
$1,416
($26)
70%

2.0 $64,700
30%
$1,618
($33)
70%

3.0 $72,800
30%
$1,820
($44)
70%

5.0 $87,350
30%
$2,184
($52)
Percent of AMI
Assumed Family Size
Household Income
Income Allocation to Housing
Monthly Housing Cost
(Less) Utility Allowance (2)

Maximum Monthly Rent $1,390 $1,585 $1,776 $2,132
(1) Reflects City of Carlsbad utility allowances, as of February 1, 2020.

Monthly Utility Studio One Two Three
Gas Heating $7 $9 $12 $14
Gas Cooking $5 $6 $8 $10
Other Electric $7 $9 $12 $14
Gas Water Heating 2 $9. g_.2 $14
Total $26 $33 $44 $52
Prepared by: Keyser Marston Associates, Inc.

FilenarNaK6hsRal agi?4pes Analysis_v6_15%;4/12/2021;lag Item #4 Page 15299telM

WORKSHEET 5
ESTIMATE OF AFFORDABLE RENTS - 100% AFFORDABLE

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Eli
Stacked Flats over Tuck-Under Parking
Stacked Flats over Podium Parking
A.

Number of Bedrooms 0 1 2 3
City of Carlsbad

Percent of AMI 50% 50% 50% 50%

Assumed Family Size 1.0 2.0 3.0 5.0

Household Income $40,450 $46,200 $52,000 $62,400

Income Allocation to Housing 30% 30% 30% 30%

Monthly Housing Cost $1,011 $1,155 $1,300 $1,560

(Less) Utility Allowance (1) ($26) ($33) ($44) f$52)

Maximum Monthly Rent $985 $1,122 $1,256 $1,508
B. Low Income Housing Tax Credit (LIHTC} Program
50% 50% 50% 50% Percent of AMI

Assumed Family Size 1.0 1.5 3.0 4.5

Household Income $40,450 $43,325 $52,000 $60,075

Income Allocation to Housing 30% 30% 30% 30%

Monthly Housing Cost $1,011 $1,083 $1,300 $1,501

(Less) Utility Allowance (1) ($26) ($33) ($44) ($52)

Maximum Monthly Rent $985 $1,050 $1,256 $1,449

C. Maximum Monthly Rent $985 $1,050 $1,256 $1,449
(1) Reflects City of Carlsbad utility allowances, as of February 1, 2020.

Monthly Utility Studio One Two Three
Gas Heating $7 $9 $12 $14
Gas Cooking $5 $6 $8 $10
Other Electric $7 $9 $12 $14
Gas Water Heating Si $3 $12 .$..L.4
Total $26 $33 $44 $52
Prepared by: Keyser Marston Associates, Inc.

FilenarMO(Cths2a2t4pes Analysis_v6_15%;4/12/2021;lag Item #4 Page 153Pote1W1

WORKSHEET 6

ESTIMATE OF AFFORDABLE SALES PRICES - STACKED FLATS OVER TUCK-UNDER PARKING - VILLAGE VI

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Stacked Flats over Podium Tuck-Under Parking
One Bedroom

Two Bedroom

Three Bedroom

I. Maximum Affordable Sales Price (2)

Percent of AM)

80%

80%

80%
Assumed Family Size

2.0 3.0

5.0 Household Income

$73,950

$83,200

$99,800
Income Allocation to Housing

30%

30%

30%
Amount Available for Housing

$22,185

$24,960

$29,940
Annual HOA (ay $350 /Mo. $4,200 $400 /Mo. $4,800 $450 /Mo. 55,400 Annual Utilities (4)

$1,056

$1,212

$1,332
Tax Rate

1.20%

1.20%

1.20%
Annual Taxes (s)

$3,048

$3,408

$4,176
Available for Mortgage

$13,881

$15,540

$19,032
Interest Rate (6)

4.50%

4.50%

4.50%
Down Payment

10.00%

10.00%

10.00%
Supportable Mortgage

$228,298

$255,583

$313,015
Add: Down Payment

$25,400

$28,400

$34,800
Maximum Unit Price

$254,000

$284,000

$348,000
(1) Based on 2020 income limits published by the State of California Department of Housing and Community and Development (HCD). (2) Based on affordable housing allowable housing expenses as defined in Section 21.85.020.A of the Carlsbad Municipal Code. (3) Allowance for structure insurance, maintenance, and reserves. (4) Per the City of Carlsbad Utility Allowance Schedule, effective December 1, 2019, Rev. January 28, 2020. KMA assumed utility profile as follows:

Number of Bedrooms: One Two Three
Gas Heat $9 $12 $14
Gas Cooking $6 $8 $10
Other Electric $9 $12 $14
Gas Water Heater $9 $12 $14
Water $20 $22 $24
Sewer $16 $16 $16
Trash $19 „$,L.9 $19
Total Utility Allowance $ag $101 $111
Total Annual Utilities $1,056 $1,212 $1,332
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual home. (6) (MA assumption based on data provided by Bankrate.com, June 2020; includes Private Mortgage Insurance (PM!).

Prepare ny: Keyer 641a(st:4AsAgsiates, Inc.

FilenamPflar683d_4(ot )egAialysis_v6_15%; 4/12/2021; lag Item #4 Page 154F1le€119/

WORKSHEET 7
ESTIMATE OF AFFORDABLE SALES PRICES - MIXED-USE STACKED FLATS - VILLAGE 0.)

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Mixed-Use Stacked Flats
One Bedroom

Two Bedroom

Three Bedroom

I. Maximum Affordable Sales Price 121

Percent of AMI

80%

80%

80%
Assumed Family Size

2.0 3.0

5.0 Household Income

$73,950

$83,200

$99,800
Income Allocation to Housing

30%

30%

30%
Amount Available for Housing

$22,185

$24,960

$29,940
Annual HOA (31 $400 /Mo. $4,800 $450 /Mo. $5,400 $500 /Mo. $6,000 Annual Utilities (41

$1,056

$1,212

$1,332
Tax Rate

1.20%

1.20%

1.20%
Annual Taxes 151

$2,940

$3,300

$4,068
Available for Mortgage

$13,389

$15,048

$18,540
Interest Rate 16)

4.50%

4.50%

4.50%
Down Payment

10.00%

10.00%

10.00%
Supportable Mortgage

$220,206

$247,491

$304,923
Add: Down Payment

$24,500

$27,500

$33,900
Maximum Unit Price

$245,000

$275,000

$339,000
(1) Based on 2020 income limits published by the State of California Department of Housing and Community and Development (HCD). (2) Based on affordable housing allowable housing expenses as defined in Section 21.85.020.A of the Carlsbad Municipal Code. (3) Allowance for structure insurance, maintenance, and reserves. (Al Per the City of Carlsbad Utility Allowance Schedule, effective December 1, 2019, Rev. January 28, 2020. KMA assumed utility profile as follows:

Number of Bedrooms: .91..m Two Three
Gas Heat $9 $12 $14
Gas Cooking $6 $5 $10
Other Electric $9 $12 $14
Gas Water Heater 59 $12 $14
Water $20 $22 $24
Sewer $16 $16 $16

Trash

Total Utility Allowance $88 $101 $111
Total Annual Utilities $1,056 $1,212 $1,31,121
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual home. (6) KMA assumption based on data provided by Bankrate.com , June 2020; includes Private Mortgage Insurance (PMI).

Prepared Keyxr DilefstgvAsvciates, Inc.

FilenamKkairWd(oto(444alysis_v6_15%; 4/12/2021; lag Item #4 Page 15.51190M

WORKSHEET 8
ESTIMATE OF AFFORDABLE SALES PRICES - ROWHOMES - BARRIO (3.)

INCLUSIONARY HOUSING IN-LIEU FEE UPDATE

CITY OF CARLSBAD
Zero Lot Line Rowhomes

Three Bedroom Two Bedroom

I. Maximum Affordable Sales Price12)

Percent of AMI

80%

80%
Assumed Family Size

3.0 5.0
Household Income

$83,200

$99,800
Income Allocation to Housing

30%

30%
Amount Available for Housing

$24,960

$29,940
Annual HOA (3) $200 /Mo. $2,400 $250 /Mo. $3,000
Annual Utilities (4)

$1,212

$1,332
Tax Rate

1.20%

1.20%
Annual Taxes (5)

$3,840

$4,608
Available for Mortgage

$17,508

$21,000
Interest Rate (6)

4.50%

4.50%
Down Payment

10.00%

10.00%
Supportable Mortgage

$287,950

$345,382
Add: Down Payment

$32,000

$38,400
Maximum Unit Price

$320,000

$384,000
(1) Based on 2020 income limits published by the State of California Department of Housing and Community and Development (HCD). (2) Based on affordable housing allowable housing expenses as defined in Section 21.85.020.A of the Carlsbad Municipal Code. (3) Allowance for structure insurance, maintenance, and reserves. ' (4) Per the City of Carlsbad Utility Allowance Schedule, effective December 1, 2019, Rev. January 28, 2020. KMA assumed utility profile as follows:

Number of Bedrooms: Two Three
Gas Heat $12 $14
Gas Cooking $8 $10
Other Electric $12 $14
Gas Water Heater $12 $14
Water $22 $24
Sewer $16 $16
Trash $19 $19
Total Utility Allowance $101 $111
Total Annual Utilities $1,212 $1,332
(5) Based on affordable unit price. Property tax assessment may be based on market value of actual home. (6) KMA assumption based on data provided by Bankrate.com, June 2020; includes Private Mortgage Insurance (PMI).

Prepared by: Keyser Marston Associates, Inc.

FilenanlaKhaa agt24pes Analysis_v6_15%; 4/12/2021; lag Item #4 Page 156RstelM

APPENDIX 7
Supporting Worksheets - Market Data
Inclusionary Housing In-Lieu Fee Update
City of Carlsbad
March 22, 2022 Item #4 Page 157FOre184

RESIDENTIAL LAND SALES

CITYWIDE
WORKSHEET 9
a) SURVEY OF COMPARABLE LAND SALES - CITYWIDE (1)(2) --s INCLUSIONARY HOUSING 1N-LIEU FEE UPDATE
Nj CITY OF CARLSBAD
NJ
CD

Units/

Land Area Residential Units

N-)
N.) Sale Date Property Address Acre Sale Price Acres $/SF Units $/Unit Proposed Use Buyer (True) Company 01/02/19 438 Tamarack Ave

$1,960,000 0.39 $117 N/A N/A Residential condominiums Michael Fulton

05/23/18 7550 Gibraltar St

$1,540,000 0.41 $86 N/A N/A Multi-family residential units Foroozandeh Y Sahba

06/21/17 7540 Gibraltar St

$895,000 0.39 $53 N/A N/A Multi-family residential units

10/27/16 3251 Marisol PI 18.2 $34,500,000 15.25 $52 278 $124,101 Apartment units LMC

10/17/18 5592 El Camino Real

$6,650,000 3.21 $48 N/A N/A Continuing care retirement community Steadfast Investment Properties, Inc.

08/26/15 3980 Highland Dr

$1,675,000 1.07 $36 N/A N/A Single-family homes Charles & Barbara Speck

04/07/17 1833 Buena Vista Way 3.2 $4,000,000 3.09 $30 10 $400,000 Large lot single-family homes ).F. Shea Co., Inc.

07/17/17 2924 Highland Dr 2.3 $2,750,000 2.21 $29 5 $550,000 Large lot single-family homes Benjamin Glinsky

01/10/19 Faraday Ave

$7,350,000 6.00 $28 N/A N/A Senior living community 05L Construction, Inc.

07/17/18 1835 Buena Vista Way 3.1 $4,275,000 3.84 $26 12 $356,250 Large lot single-family homes California West Communities

07/17/15 3758-3794 Highland Dr 3.0 $1,750,000 2.31 $17 7 $250,000 Large lot single-family homes Michael J Lockerman

01/30/15 Palomar Oaks Way 22.5 $4,150,000 8.87 $11 200 $20,750 Multi-family residential units Integral Communities

10/11/19 7203 Babilonia St

$720,000 1.78 $9 N/A N/A Hold for Investment; potential single-family

10/20/17 Poinsettia Ln 2.4 $18,500,000 50.80 $8 123 $150,407 Single-family homes Lennar Homes of California, Inc.

02/04/15 Haymar Dr

$48,000,000 156.00 $7 N/A N/A Portion of Quarry Creek (The Preserve) Cornerstone Communities

04/12/16 Aura Cir 0.6 $836,000 14.58 $1 9 $92,889 Single-family homes

Minimum 0.6 $720,000 0.39 $1 $5 $20,750

Maximum 22.5 $48,000,000 156.00 $117 $278 $550,000

Median 3.1 $3,375,000 3.15 $28 $11 $200,203

(1)
3 Average 6.9 $8,721,938 16.89 $35 $81 $243,050

ro
CO
0 (1) Survey reflects Citywide land sales since January 1, 2015. (2) Excludes Carlsbad Village, Barrio, and adjacent areas (see Worksheet 10).

Source: CoStar Group, Inc.

Prepared by: Keyser Marston Associates, Inc.

Filename: Carlsbad_Market Data v2_12-04-2020.02-1-2021\4/12/2021; ema