March 19, 2024 Dublin City Council Special Meeting Agenda 1
COUNCILMEMBERS Bray Community Room
Melissa Hernandez, Mayor (Regional Meeting Room)
Dr. Sherry Hu, Vice Mayor Civic Center
Jean Josey, Councilmember 100 Civic Plaza
Michael McCorriston, Councilmember Dublin, CA 94568
Kashef Qaadri, Councilmember
Special Meeting of the
DUBLIN CITY COUNCIL
Tuesday, March 19, 2024 Location: Bray Community Room
(Regional Meeting Room)
100 Civic Plaza
Dublin, CA 94568
Notice is hereby given that a Special Meeting of the City of Dublin City Council will be held on Tuesday, March 19, 2024 at 5:30 PM at Bray Community Room (Regional Meeting Room), Civic Center, 100 Civic Plaza, Dublin.
1. CALL TO ORDER AND PLEDGE OF ALLEGIANCE
2. PUBLIC COMMENT
At this time, the public is permitted to address the City Council on non-agendized items.
Please step to the podium and clearly state your name for the record. COMMENTS SHOULD NOT EXCEED THREE (3) MINUTES. In accordance with State Law, no action or discussion may take place on any item not appearing on the posted agenda. The Council may respond to statements made or questions asked, or may request Staff to report back at a future meeting concerning the matter. Any member of the public may contact the City Clerk’s Office related to the proper procedure to place an item on a future City Council agenda. The exceptions under which the City Council MAY discuss and/or take action on items not appearing on the agenda are contained in Government Code Section 54954.2(b)(1)(2)(3).
3. STUDY SESSION
3.1 Inclusionary Zoning and Affordable Housing In-Lieu Fee Study Session On January 9, 2024, the City Council held a public hearing to consider amendments to the Inclusionary Zoning Regulations and Affordable Housing In-Lieu Fee. At the conclusion of that public hearing the City Council directed Staff to return at a future meeting with additional information and analysis regarding increasing the inclusionary zoning requirement to 15%; increasing the in-lieu fee; differentiating the affordable housing requirements for different ownership product types; the impact of interest rate fluctuations; and a projection of in-lieu fee revenue. The City Council will hold a Study Session and receive a presentation
with this information. No formal action will be taken
by the City Council at this Study Session.
1 March 19, 2024 Dublin City Council Special Meeting Agenda 2
STAFF RECOMMENDATION:
Receive a presentation and provide feedback and direction regarding amendments to the Inclusionary Zoning Regulations and Affordable Housing In-Lieu Fee program.
Staff Report
Attachment 1 - Staff Report dated January 9, 2024 (without attachments)
3.1 PowerPoint Presentation
4. ADJOURNMENT
Upcoming City Council Schedule: Regular City Council Meeting, March 19, 2024
This AGENDA is posted in accordance with Government Code Section 54954.2(a) If requested, pursuant to Government Code Section 54953.2, this agenda shall be made available in appropriate alternative formats to persons with a disability, as required by Section 202 of the Americans with Disabilities Act of 1990 (42 U.S.C. Section 12132), and the federal rules and regulations adopted in implementation thereof. To make a request for disability-related modification or accommodation, please contact the City Clerk’s Office (925) 833-6650 at least 72 hours in advance of the meeting.
AFFIDAVIT OF NOTICING AND POSTING:
I, Marsha Moore, City Clerk for the City of Dublin, declare that a copy of this agenda / notice was posted in the kiosk in front of the Civic Center, on the City’s website, and that the City of Dublin City Councilmembers and the Media were provided notice on March 13, 2024.
ATTEST:
________________________________________
Marsha Moore, MMC, City Clerk
2 STAFF REPORT
CITY COUNCIL
Agenda Item 3.1
DATE: March 19, 2024
TO: Honorable Mayor and City Councilmembers
FROM: Linda Smith, City Manager
SUBJECT: Inclusionary Zoning and Affordable Housing In-Lieu Fee Study Session Prepared by: Jason Earl, Senior Management Analyst
EXECUTIVE SUMMARY:
On January 9, 2024, the City Council held a public hearing to consider amendments to the Inclusionary Zoning Regulations and Affordable Housing In-Lieu Fee. At the conclusion of that public hearing the City Council directed Staff to return at a future meeting with additional information and analysis regarding increasing the inclusionary zoning requirement to 15%; increasing the in-lieu fee; differentiating the affordable housing requirements for different ownership product types; the impact of interest rate fluctuations; and a projection of in-lieu fee revenue. The City Council will hold a Study Session and receive a presentation with this information. No formal action will be taken by the City Council at this Study Session.
STAFF RECOMMENDATION:
Receive a presentation and provide feedback and direction regarding amendments to the Inclusionary Zoning Regulations and Affordable Housing In-Lieu Fee program.
FINANCIAL IMPACT:
None.
DESCRIPTION:
Background
The City’s Two-Year Strategic Plan includes Strategy 2: Housing Affordability, which incorporates the following two Objectives:
Objective 2B: Ensure the City’s inclusionary zoning regulations incentivize targeted housing production; and
Objective 2C: Prepare a nexus study to evaluate the affordable housing commercial linkage fee and affordable housing in-lieu fee for for-sale and rental housing. 3
Staff and the City’s consultant, Economic and Planning Systems (EPS), prepared an Affordable Housing In-Lieu Fee Feasibility Study and a Commercial Linkage Fee Nexus Study. As directed by the City Council, these studies analyzed and assessed the targeted housing production and fees, and provided a housing market analysis to ensure that Dublin remains competitive for both housing and commercial development, while ensuring the availability of affordable housing.
The City Council received an informational report on these efforts on August 15, 2023, and provided feedback and direction regarding updates to these programs. On September 19, 2023, the City Council received another informational report and directed Staff to prepare updates to the Inclusionary Zoning Regulations, Affordable Housing In-Lieu Fee, and Non-Residential Development Affordable Housing Impact Fee which is also referred to as a “Commercial Linkage Fee”.
The City Council's direction included amendments which prioritize the collection of fees that can be leveraged to facilitate the production of lower income units to satisfy the City’s Regional Housing Needs Allocation (RHNA) while providing on-site units where feasible. Staff prepared amendments to these programs that align with the priorities set by the City Council.
On December 12, 2023, the Planning Commission held a public hearing and unanimously recommended approval of the proposed amendments to the Inclusionary Zoning Regulations and Affordable Housing In-Lieu Fee. On January 9, 2024, the City Council held a public hearing to consider the proposed amendments to the Inclusionary Zoning Regulations, Affordable Housing In-Lieu Fee, and Non-Residential Development Affordable Housing Impact Fee (Attachment 1). At the conclusion of the public hearing the City Council directed Staff to return at a future meeting with additional information and analysis regarding the Inclusionary Zoning Regulations and Affordable Housing In-Lieu Fee.
At this Study Session, the City Council will receive a presentation by Staff and EPS addressing the following information as requested by the City Council:
Evaluate increasing the inclusionary zoning requirement to 15%. Evaluate further increasing the proposed Affordable Housing In-Lieu Fee. Present options to differentiate the affordable housing requirements and in-lieu fee for the different ownership product types (i.e., condominiums, townhomes, and single-family homes). Demonstrate how interest rate fluctuations impact the inclusionary zoning and in-lieu fee recommendations.
Provide a projection of the Affordable Housing In-Lieu Fee revenue. 4
STRATEGIC PLAN INITIATIVE:
Strategy 2: Housing Affordability
Objective 2B: Ensure the City’s inclusionary zoning regulations incentivize targeted housing production.
Objective 2C: Prepare a nexus study to evaluate the affordable housing commercial linkage fee and affordable housing in-lieu fee for for-sale and rental housing.
ENVIRONMENTAL REVIEW:
The City Council is holding a Study Session on the Inclusionary Zoning Regulations and Affordable Housing In-Lieu Fee, and no formal action will be taken at this time. The Study Session is not subject to the requirements of the California Environmental Quality Act (CEQA) as it does not have the potential to result in a direct physical change in the environment or a reasonably foreseeable indirect change in the environment and, thus, does not meet the definition of a project under CEQA Guidelines Section 15378.
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
A public notice is not required for the City Council to hold a Study Session. The City Council Agenda was posted.
ATTACHMENTS:
1) City Council Staff Report dated January 9, 2024 (without attachments) 5 S
TAFF REPORT
CITY COUNCIL
Agenda Item 6.1
DATE: January 9, 2024
TO: Honorable Mayor and City Councilmembers
FROM: Linda Smith, City Manager
SUBJECT: Amendment to the Dublin Municipal Code Inclusionary Zoning Regulations (Chapter 8.68), Adopting a Methodology for Determining Affordable Housing In-Lieu Fees and Adopting Non-Residential Development Affordable Housing Impact Fees (PLPA-2023-00032) Prepared by: Jason Earl, Senior Management Analyst
E
XECUTIVE SUMMARY:
T
he City Council’s Two-Year Strategic Plan includes a review of the Inclusionary Zoning Regulations (Dublin Municipal Code Chapter 8.68), Affordable Housing In-Lieu Fee, and Non- Residential Development Affordable Housing Impact Fee (aka “Commercial Linkage Fee”).
Staff and the City’s consultant, Economic and Planning Systems, prepared an Affordable Housing In-Lieu Fee Feasibility Study and a Commercial Linkage Fee Nexus Study to address the Strategic Plan objectives. The City Council received informational reports on August 15, 2023, and September 19, 2023, and directed Staff to prepare amendments to the Inclusionary Zoning Regulations, Affordable Housing In-Lieu Fee, and Non-Residential Development Affordable Housing Impact Fee programs to ensure they align with the economics of developing affordable housing and the City Council’s priorities. Staff has prepared the updates to these programs. The City Council will hold a Public Hearing to consider adopting the amendments to these programs.
S
TAFF RECOMMENDATION:
C
onduct the public hearing, deliberate, and take the following actions: 1) wa ive the reading and INTRODUCE the Ordinance Approving Amendments to Dublin Municipal Code Chapter
8.68 (Inclusionary Zoning Regulations); 2) Adopt the Resolution Establishing the Methodology for Determining the Affordable Housing In-Lieu Fee for Future Residential Units Subject to the City of Dublin Inclusionary Zoning Regulations; and 3) Adopt the Resolution Approving the Non-Residential Development Affordable Housing Impact Fees.
Attachment 1
6
FINANCIAL IMPACT:
The Affordable Housing In-Lieu Fee is proposed to be amended to align with the economics of developing affordable housing. This will generate additional funding for the Affordable Housing Fund. The proposed amendments to the Non-Residential Affordable Housing Impact Fee program will combine the Research & Development and Office uses into a single fee and ensure that the impact fee program does not overburden the economic development priorities set by the City Council.
DESCRIPTION:
Background
The City of Dublin Two-Year Strategic Plan includes Strategy 2: Housing Affordability, which includes the following two objectives:
• Objective 2b: Ensure the City’s inclusionary zoning regulations incentivize targeted housing production; and
• Objective 2c: Prepare a nexus study to evaluate the affordable housing commercial linkage fee and affordable housing in-lieu fee for for-sale and rental housing.
The consulting firm Economic and Planning Systems (EPS) was selected through a competitive process to assist Staff with addressing these Strategic Plan Objectives. Staff and EPS prepared an analysis of the development economics, reviewed industry best practices, reviewed inclusionary regulations in the surrounding Tri-Valley cities, and evaluated the nexus between non-residential development and the need it generates for affordable housing to formulate recommendations to the City Council. This culminated in the Affordable Housing In-Lieu Fee Feasibility Study and the Commercial Linkage Fee Nexus Study which are included as Attachments 3 and 5.
On August 15, 2023, the City Council received an informational report on these efforts (Attachment 7). The City Council provided initial feedback and direction regarding updates to these programs. On September 19, 2023, the City Council received another informational report (Attachment 8) and directed Staff to prepare the following updates to the Inclusionary Zoning Regulations, Affordable Housing In-Lieu Fee, and Non-Residential Development Affordable Housing Impact Fee which is also referred to as a “Commercial Linkage Fee”.
• Lower the Inclusionary Zoning Regulations applicability threshold to projects of 10+ units; and
• Assess in-lieu fees on a per-square-foot basis for each market-rate unit; and • Establish separate regulations for ownership and rental developments; and • Retain the existing Commercial Linkage Fee amount with an annual inflationary index; and
Attachment 1
7
• Combine the Research & Development and Office use categories and set the fee at $1.39 per square foot, which is the average of the current fee for those two use categories.
Staff has prepared the amendments to these programs for consideration by the City Council.
The Ordinance adopting amendments to the Inclusionary Zoning Regulations is included as Attachment 1, the Resolution approving the methodology for determining the Affordable Housing In-Lieu Fee is included as Attachment 2, and the Resolution approving the Non- Residential Development Affordable Housing Impact Fee is included as Attachment 4.
Analysis
The following is an overview of the proposed amendments to the Inclusionary Zoning Regulations, Affordable Housing In-Lieu Fee, and the Non-residential Development Affordable Housing Impact Fee. The proposed amendments align the economics of developing affordable housing and the efforts of the City Council to prioritize the collection of fees that can be leveraged to facilitate the production of lower income units to satisfy the City’s Regional Housing Need Allocation (RHNA) while providing on-site units.
Inclusionary Zoning Requirements
The proposed amendments to the Inclusionary Zoning Regulations (IZR) in the Dublin Municipal Code (Chapter 8.68) create separate regulations for ownership and rental developments. The threshold for projects subject to the IZR would be reduced from 20 units to 10 units. The proposed allocation of affordable ownership units remains unchanged.
However, the allocation of affordable rental units is proposed to focus on low-income households. Table 1 summarizes these proposed regulations.
Table 1. Ownership and Rental Policy Recommendations
Project
Size
Threshold
Overall
Affordability
Requirement
Very
Low
Low Moderate
Ownership 10 Units 12.5% 0% 40% 60%
Rental 10 Units 10% 0% 100% 0%
The IZR (Section 8.68.020.E) requires resale controls to ensure that affordable ownership units remain affordable for a total of 55 years. Staff proposes to amend the regulations to reset the 55-year period with each transfer of ownership of future for sale units created through the inclusionary program.
The implementation procedures for the IZR include selection criteria that provide for the use of preference points by the developer upon the initial sale of units (Section 8.68.050.D). Staff is proposing to amend this section to require the use of preference points with the resale of ownership units.
Attachment 1
8
The draft Ordinance approving the amendments to the Inclusionary Zoning Regulations is in
cluded as Attachment 1. Please refer to Attachment 6 for the proposed amendments in redline format where underlined text is proposed to be added and text with a strikethrough is proposed to be deleted.
A
ffordable Housing In-Lieu Fee
The proposed Affordable Housing In-Lieu Fee would be assessed on a per-square-foot basis for each market-rate unit produced. The proposed fee is based on the Affordable Housing In- Lieu Fee Feasibility Study and rounded to the nearest dollar. This fee is reflective of the cost to produce affordable ownership and rental units. The proposed fee would be set at $9/square foot and adjusted annually based on an inflationary index. The proposed fee is equivalent to approximately $400,000 per affordable ownership unit and $237,000 per rental unit. The Resolution to approve the proposed Affordable Housing In-Lieu Fee is included as Attachment 2.
Non-Residential Development Affordable Housing Impact Fee The DMC (Chapter 7.86) established the authority for the City to impose a Non-Residential Development Affordable Housing Impact Fee, also known as a “Commercial Linkage Fee”.
This fee is based on a nexus between non-residential development and the need it generates for affordable housing. The fee was first adopted by the City Council in 2005 (Resolution 70- 05) and is adjusted annually based on an inflationary index. The amount was set to ensure that it does not overburden the economic development priorities set by the City Council. New non- residential development is assessed this fee on a per-square-foot basis at the time a building permit is issued.
On September 19, 2023, the City Council directed Staff to retain the existing fee structure with an inflationary index but combine Research & Development and Office uses into a single category and set the fee at $1.39 per square foot. Additionally, the names of the land use categories have been updated to be consistent with the Nexus Study and current industry terminology. The remainder of the program is unchanged. The Resolution adopting the Non- Residential Development Affordable Housing Impact Fee is included as Attachment 4.
ENVIRONMENTAL DETERMINATION:
The California Environmental Quality Act (CEQA), together with State Guidelines and City of Dublin CEQA Guidelines and Procedures require that certain projects be reviewed for environmental impacts and that environmental documents be prepared. The proposed Zoning Ordinance Amendments are exempt from the requirements of CEQA pursuant to CEQA Guidelines Section 15061(b)(3) as the amendments would not result in any physical changes and it can be seen with certainty that the amendments would not have a significant effect on the environment.
Attachment 1
9
PLANNING COMMISSION REVIEW:
On December 12, 2023, the Planning Commission held a public hearing to consider the proposed amendments to the Inclusionary Zoning Regulations and make a recommendation to the City Council. Following the public hearing, the Planning Commission unanimously adopted Resolution No. 23-12 (Attachment 9), recommending the City Council approve the proposed amendments. The Planning Commission further recommended periodic review of the Inclusionary Zoning Regulations.
STRATEGIC PLAN INITIATIVE:
Strategy 2: Housing Affordability
Objective 2b: Ensure the City’s inclusionary zoning regulations incentivize targeted housing production.
Objective 2c: Prepare a nexus study to evaluate the affordable housing commercial linkage fee and affordable housing in-lieu fee for for-sale and rental housing.
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
In accordance with State law, a public notice was published in the East Bay Times ten days prior to the hearing and again five days prior to the hearing, posted at several locations throughout the City, and sent to interested parties notifying the community of the City Council’s consideration of the proposed amendments to the Inclusionary Zoning Regulations, Affordable Housing In-Lieu Fee, and the Non-Residential Development Affordable Housing Impact Fee. The City Council Agenda was posted.
ATTACHMENTS:
1) Ordinance Approving Amendments to Dublin Municipal Code Chapter 8.68 (Inclusionary Zoning Regulations)
2) Resolution Establishing the Methodology for Determining the Affordable Housing In-Lieu Fee for Future Residential Units Subject to the City of Dublin Inclusionary Zoning Regulations
3) Exhibit A to the Resolution - Inclusionary Housing Feasibility Report dated December 7, 2023
4) Resolution Approving the Non-Residential Development Affordable Housing Impact Fees 5) Exhibit A to the Resolution - Commercial Linkage Fee Nexus Study dated October 27, 2023 6) Redlined Version of Amendment to Inclusionary Zoning Regulations 7) City Council Staff Report dated August 15, 2023
8) City Council Staff Report dated September 19, 2023
9) Planning Commission Resolution 23-12 Recommending City Council Approval of Amendments to Dublin Municipal Code Chapter 8.68 (Inclusionary Zoning Regulations) Attachment 1
10 Economic & Planning Systems, Inc.
The Economics of Land Use
1330 Broadway, Suite 450 Oakland, CA 94612
510.841.9190 www.epsys.com
UPDATED INCLUSIONARY
ZONING SCENARIOS
Dublin City Council Study
Session
March 19, 2024
11 Economic & Planning Systems EPS PPT Presentation | 1
BACKGROUND
Strategic Plan Strategy 2: Housing Affordability
August 15, 2023, & September 19, 2023
– Information Report and Recommendations:
December 12, 2023
– Planning Commission held a public hearing and
recommended approval of the proposed amendments
January 9, 2024
– City Council directed staff to return at a future meeting with additional information
12 Economic & Planning Systems EPS PPT Presentation | 2
PRIOR CITY COUNCIL DIRECTION
Prioritize the collection of Affordable Housing In-Lieu Fees Lower the Inclusionary Zoning Regulations applicability threshold to projects of 10+ units;
Assess in-lieu fees of $9 per square foot for each market- rate unit;
Establish separate regulations for ownership and rental developments;
13 Economic & Planning Systems EPS PPT Presentation | 3
WHAT WE TESTED
Questions
Can we increase the inclusionary requirement on ownership housing to 15%?
Can we raise the in-lieu fee?
Would lower interest rates allow City to consider higher inclusionary requirement or higher in-lieu fees?
Projection of units and revenue
Tested Illustrative 100-unit Development
Threshold Profit/Return Requirements:
5.5% yield-on-cost
for rental product
15% profit for
ownership product
14 Economic & Planning Systems EPS PPT Presentation | 4
REASONS PROJECT DEVELOPMENT ECONOMICS VARY
It’s not ideal to push too close to the feasibility threshold, because project economics vary widely, and the inclusionary requirements should work for most (if not all) new development
– Timing and cost of land acquisition
– Length and complexity of entitlement process
– Changes in costs of labor and materials
– Availability of materials and supply chain challenges – Availability of capital and interest rate environments – Other new construction and competitive supply
– Market prices and rents
– Developer/investor return requirements
– Etc.
15 Economic & Planning Systems EPS PPT Presentation | 5
CURRENT PROGRAM
Overall inclusionary requirement is 12.5% affordable
– Option 1: Build full requirement on-site
– Option 2: Must build 60% and pay in-lieu fee of $241,131 per affordable unit on remaining 40%
Rental Ownership
Option Metric Apartment Condominium SF Detached Townhome Option
1: Build
Only
Affordable Units
Built
12 12 12 12
Cost/Value of
Requirement
$2,330,823
($21.19/sq. ft.)
$5,876,104
($39.17/sq. ft.)
$7,493,752
($31.22/sq. ft.)
$5,797,149
($28.99/sq. ft.)
Feasibility marginal no yes yes
Option
2: Must
Build +
Fee
Affordable Units
Built
7 7 7 7
Equiv. Fee per
Market Rate Sq. Ft.
$11.79 $8.64 $5.40 $6.48
City Fee Revenue $1,205,655 $1,205,655 $1,205,655 $1,205,655 Cost/Value of
Requirement
$2,385,222
($21.68/sq.ft.)
$4,652,349
($31.02/sq. ft.)
$5,599,769
($23.33/sq. ft.)
$4,608,400
($23.04/sq. ft.)
Feasibility marginal yes yes yes
16 Economic & Planning Systems EPS PPT Presentation | 6 JANUARY 2024 RECOMMENDATION
Overall requirement of 12.5% affordable for Ownership (SF Detached, Townhomes, and Condos) and 10% affordable for Rental
– Option 1: Build full requirement on-site
– Option 2: Must build 60% and pay in-lieu fee of $9 per market-rate sq. ft. on remaining 40%
Rental Ownership
Option Metric Apartment Condominium SF Detached Townhome Option
1: Build
Only
Affordable Units
Built
10 12 12 12
Cost/Value of
Requirement
$2,369,153
($21.54/sq. ft.)
$5,876,104
($39.17/sq. ft.)
$7,493,752
($31.22/sq. ft.)
$5,797,149
($28.99/sq. ft.)
Feasibility marginal no yes yes
Option
2: Must
Build +
Fee
Affordable Units
Built
6 7 7 7
Fee per Market Rate
Sq. Ft.
$9.00 $9.00 $9.00 $9.00
City Fee Revenue $930,600 $1,255,500 $2,008,800 $1,674,000 Cost/Value of
Requirement
$2,352,092
($21.38/sq. ft.)
$4,702,194
($31.35/sq. ft.)
$6,402,914
($26.68/sq. ft.)
$5,076,745
($25.38/sq. ft.)
Feasibility marginal yes yes yes
17 Economic & Planning Systems EPS PPT Presentation | 7
HIGHER INCLUSIONARY PERCENTAGE
Overall requirement of 12.5% and 15% affordable for Ownership – Option 1: Build full requirement on-site, tested at 12.5% and 15% Ownership
Option Metric Condominium SF Detached Townhome
Option 1:
Build Only
@ 12.5%
Affordable Units Built
12 12 12
Cost/Value of
Requirement
$5,876,104
($39.17/sq. ft.)
$7,493,752
($31.22/sq. ft.)
$5,797,149
($28.99/sq. ft.)
Feasibility no yes yes
Option 1:
Build Only
@ 15%
Affordable Units Built
15 15 15
Cost/Value of
Requirement
$7,288,230
($48.59/sq.ft.)
$9,298,915
($38.75/sq. ft.)
$7,183,212
($35.92/sq. ft)
Feasibility no yes yes
18 Economic & Planning Systems EPS PPT Presentation | 8
HIGHER IN-LIEU FEE
Overall requirement of 15% affordable for Ownership
– Option 2: Must build 60% and pay in-lieu fee of $9, $12, or $15 per market-rate sq. ft. on remaining 40% Ownership
Option Metric Condominium SF Detached Townhome
Option 2:
Must Build +
Fee @ $9
Affordable Units Built
9 9 9
Fee per Market Rate Sq. Ft. $9.00 $9.00 $9.00
City Fee Revenue $1,228,500 $1,965,600 $1,638,000
Cost/Value of Requirement $8,516,730
($56.78/sq. ft.)
$7,654,189
($31.89/sq. ft.)
$6,049,087
($30.25/sq. ft.)
Feasibility no yes yes
Option 2:
Must Build +
Fee @ $12
Affordable Units Built
9 9 9
Fee per Market Rate Sq. Ft. $12.00 $12.00 $12.00
City Fee Revenue $1,638,000 $2,620,800 $2,184,000
Cost/Value of Requirement $8,926,230
($59.51/sq. ft.)
$8,309,389
($34.62/sq. ft.)
$6,595,087
($32.98/sq. ft.)
Feasibility no yes yes
Option 2:
Must Build +
Fee @ $15
Affordable Units Built
9 9 9
Fee per Market Rate Sq. Ft. $15.00 $15.00 $15.00
City Fee Revenue $2,047,000 $3,276,000 $2,730,000
Cost/Value of Requirement $9,335,730
($62.24/sq. ft.)
$8,964,589
($37.35/sq. ft.)
$7,141,087
($35.71/sq. ft.)
Feasibility no yes yes 19
Economic & Planning Systems EPS PPT Presentation | 9
FEE SURVEY OF LOCAL JURISDICTIONS
SINGLE FAMILY DETACHED (OWNERSHIP)
City
Overall
Inclusionary
Requirement Income Targets
Project Size
Threshold
Last
Ordinance
Update
Dublin 12.5% 60% Moderate
40% Low
20 units $241,131 per inclusionary unit 2002
Fremont 15% 66% Low
33% Moderate
All units $44.00 per sq. ft. 2021
Concord 15% 50% Moderate
50% Low
5 units $20.00 per sq. ft. [1] 2024
San Ramon 10% Moderate 10 units $15.70 per sq. ft. 2019 Hayward 10% Moderate 2 units $23.46 per sq. ft. 2018
Walnut Creek 10%
7%
6%
Moderate
Low
Very Low
All units $21.86 per sq. ft. 2017
Livermore 15% 50% Moderate
50% Low
11 units $39.94 per sq. ft. (under 11
units)
11+ units must build
2015
Danville 10% Moderate 10 units 2014
Pleasanton 20% Moderate
Low
Very Low
15 units $50,480 per dwelling unit 2000 [2]
[1] In-lieu fee option applies to Ownership projects between 5 and 9 units. [2] Pleasanton's inclusionary zoning was first adopted in 2000 and the fee level was last revised in 2018.
In-Lieu Fee
market gap calculation
20 Economic & Planning Systems EPS PPT Presentation | 10
FEE SURVEY OF LOCAL JURISDICTIONS
MULTIFAMILY (RENTAL)
City
Overall
Inclusionary
Requirement Income Targets
Project Size
Threshold
Last
Ordinance
Update
Dublin 12.5% 50% Moderate
20% Low
30% Very Low
20 units $241,131 per inclusionary unit 2002
Fremont 10% Low All units $17.50 per sq. ft. 2021
Concord 6% 4% Moderate
1% Low
1% Very Low
5 units $15 per sq. ft. 2024
San Ramon 15% 50% Low
50% Very Low
5 units $14.63 per sq. ft. (under 10
units)
10+ units must build
2019
Hayward 6% 50% Low
50% Very Low
2 units $23.46 per sq. ft. 2018
Walnut Creek 10%
6%
Low
Very Low
All units $21.86 per sq. ft. 2017
Livermore 15% 50% Low
50% Very Low
11 units 2015
Danville 15% Moderate 10 units 2014
Pleasanton 15% Low
Very Low
10 units $50,480 per dwelling unit 2000*
* Pleasanton's inclusionary zoning was first adopted in 2000 and the fee level was last revised in 2018.
In-Lieu Fee
market gap calculation
In-lieu fee N/A; must build
21 Economic & Planning Systems EPS PPT Presentation | 11
ALIGN CONDOS WITH APARTMENTS
10% affordable for multifamily: rental apartments and condominiums – Option 1: Build full requirement on-site
– Option 2: Must build 60% and pay in-lieu fee of $9 per market-rate sq. ft. on remaining 40%
Multifamily
Option Metric Apartment Condominium
Option 1: Build Only
@ 10%
Affordable Units Built 10 10
Cost/Value of Requirement $2,369,153
($21.54/sq. ft.)
$6,224,420
($41.50/sq. ft.)
Feasibility marginal no
Option 2: Must Build
+ Fee @ $9.00 Affordable Units Built
6 6
Fee per Market Rate Sq. Ft. $9.00 $9.00
City Fee Revenue $930,600 $1,269,000
Cost/Value of Requirement $2,352,092
($21.38/sq. ft.)
$5,003,652
($33.36/sq. ft.)
Feasibility marginal yes
22 Economic & Planning Systems EPS PPT Presentation | 12
TESTING CONDOMINIUMS
WHAT IF WE ALIGN CONDOS WITH APARTMENTS?
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Current Prior
Recommendation
12.5% + $9 fee
15% on Ownership
+ $12 fee
10% on Multifamily
+ $9 fee
10% on Multifamily
(split low and mod)
+ $9 fee
Feasibility Scenarios for Condominiums
Build Only Must Build + Fee
23 Economic & Planning Systems EPS PPT Presentation | 13
FEASIBILITY OUTCOMES
“VALUE” OF THE INCLUSIONARY REQUIREMENT IS PROVIDED
Rental Ownership
Scenario Option Apartment Condominium SF Detached Townhome Current
• Rental and Ownership,
12.5%
• $241,131 fee per affordable
unit
Build Only
$2,330,823 $5,876,104 $7,493,752 $5,797,149
Must-Build + Fee $2,385,222 $4,652,349 $5,599,769 $4,608,400 January
Recommendation
• Rental, 10% and $9 fee
• Ownership, 12.5% and $9
fee
Build Only
$2,369,153 $5,876,104 $7,493,752 $5,797,149
Must-Build + Fee $2,352,092 $4,702,194 $6,402,914 $5,076,745 Test:
• 15% + $9 fee
(test on Ownership only)
Build Only
$7,288,230 $9,298,915 $7,183,212
Must-Build + Fee $8,516,730 $7,654,189 $6,049,087
Multifamily Ownership
Scenario Option Apartment Condominium SF Detached Townhome Test:
• 10% on Multifamily
+ $9 fee
• 15% on SF and TH
+ $12 fee
Build Only
$2,369,153 $6,224,420 $9,298,915 $7,183,212
Must-Build + Fee $2,352,092 $5,003,652 $8,309,389 $6,595,087 Test:
• 10% on Multifamily
+ $9 fee
• 15% on SF and TH +
$15 fee
Build Only
$2,369,153 $6,224,420 $9,298,915 $7,183,212
Must-Build + Fee $2,352,092 $5,003,652 $8,964,589 $7,141,087 24 Economic & Planning Systems EPS PPT Presentation | 14
INTEREST RATES
Current interest rates are
higher than in recent
past
Chart at left shows
feasibility of a
multifamily rental
development at the
recommended 10% Low
inclusionary level with
$9/sq. ft. fee.
A lower interest rate can
reduce development
costs, leading to
improvements in
feasibility, but does not
significantly alter the
development economics
of the project.
ILLUSTRATIVE IMPACT OF LOWER INTEREST RATES ON FINANCING COSTS
5.31%
5.33%
5.36%
5.38%
5.00%
5.05%
5.10%
5.15%
5.20%
5.25%
5.30%
5.35%
5.40%
5.45%
5.50%
5.55%
5.60%
100% Onsite Build 60% Onsite Build
Recommended Inclusionary Recommended Fee
Interest Rate at 7% Interest Rate at 4%
25 Economic & Planning Systems EPS PPT Presentation | 15
ESTIMATED INCLUSIONARY FEE REVENUE
Assumes 1,100 square foot rental units and 2,400 square foot for-sale units.
Product Type
Approximate #
of Units
Current In-Lieu
fee of $241,131
Proposed
In-Lieu $9/s.f.
In-Lieu Alternative 1
For Sale: $12/s.f.
Rental: $9/s.f.
In-Lieu Alternative 2
For Sale: $15/s.f.
Rental: $9/s.f.
For Sale Units
IZO - 12.5% 474 $5,787,144 $9,521,712 $12,695,616 $15,869,520 Condos & Rental Units
IZO - 10% 2,722 $32,793,816 $25,330,932 $25,330,932 $25,330,932 Totals 3,196 $38,580,960 $34,852,644 $38,026,548 $41,200,452 26 Economic & Planning Systems EPS PPT Presentation | 16
DISCUSSION AND DIRECTION
Questions
1. Should the City’s policy continue to prioritize the collection of Affordable Housing In-Lieu Fees?
2. How should condominiums be treated?
– Like single-family and townhomes
– Like apartments
– Their own category
3. Should the inclusionary requirement on for-sale units remain at
12.5% as proposed?
– If not, what percentage should be required?
4. Should the affordable housing in-lieu fee be set at $9 per square foot as proposed?
– If not, what amount should be required?
27