Agenda Item No: R.3
AGENDA REPORT
DATE: July 1, 2025
TO: Mayor and Council
FROM: David Gassaway, City Manager
SUBJECT: Resolutions 2025-145, 2025-146, and Ordinance 2025-05 HD Inclusionary Housing Policy
Resolution 2025-145 Establishing the Amount of the Commercial Linkage Fee for Non-Residential Developments Within the City of Fairfield, and Making Findings in Support Thereof
Resolution 2025-146 Establishing an Inclusionary Housing In-lieu Fee Schedule Pursuant to Chapter 5F (Inclusionary Housing) of the City of Fairfield Municipal Code
Ordinance 2025-05 Adding Chapter 5f.1 (Inclusionary Housing) to the Fairfield Municipal Code and Finding Adoption of the Ordinance to be Exempt from Review Under the California Environmental Quality Act
Funding Source: N/A
Contact: LaTanya Terrones, (707) 428-7454
RECOMMENDED ACTION
Adopt resolutions; waive full readings, read by titles only; and introduce ordinance for first reading.
STATEMENT OF ISSUE
Like many communities across California, the City of Fairfield (City) is experiencing increasing housing affordability challenges. The Regional Housing Needs Allocation (RHNA) requires the City to plan for and accommodate housing at all income levels, inc luding very low -, low -, and moderate-income households.
To address these challenges, many jurisdictions in California have implemented inclusionary housing policies as an effective strategy to promote economically diverse communities, mitigate displacement, and support the long -term development of affordable housing. Adopting such a
policy in Fairfield would support the City's broader housing goals and help meet state-mandated requirements.
DISCUSSION
On August 17, 2023, the City Council authorized a Req uest for Proposals (RFP) to solicit an Inclusionary Housing consultant to prepare a Commercial Linkage Fee Nexus Study, In Lieu Fee Feasibility Study, conduct community engagement, and prepare an Inclusionary Housing Ordinance. The City hired Economic Plan ning Systems (EPS) to perform the analysis. The Inclusionary Housing Policy would allow the City to increase its affordable housing supply and generate revenue that could be used for future affordable housing projects.
Through an extensive process, including two city council study sessions, one developer workshop, and several opportunities for public feedback, the City has established an Inclusionary Housing Policy.
What Is Inclusionary Housing?
Inclusionary Housing is a local zoning ordinance or land use policy that either requires or encourages housing developers to sell or rent a portion of their newly built homes to lower - or moderate-income households at an affordable rate.
Inclusionary Housing seeks to capture some of the value of rising real estate prices to provide community benefits by using local land use controls to ensure that developers produce needed affordable housing units along with market-rate units and that the City utilizes the limited supply of developable land in a manner that serves households at all income levels.
An inclusionary ordinance is one of the strongest tools available to cities for implementing affordable housing policies and creating new affordable units. An inclusionary ordinance provides opportunities for lower-income households to live in higher resource areas, can aid in dispersing housing affordable to lower -income households throughout the community, and can help address systemic barriers and foster a more diverse, equitable, and inclusive culture.
Inclusionary Housing is unique in that it is one of the only methods of producing affordable housing that does not require public subsidy.
Depending on how the program is structured, it can produce deed -restricted affordable homes (rental or ownership) within new deve lopment and/or produce funding for the development of deed-restricted affordable homes (rental or ownership) in other areas of the City.
As a related policy, commercial linkage impact fees can also be established to require developers of nonresidential de velopment projects to pay a housing impact fee to help fund affordable housing development. The conceptual underpinning of the fee is that new nonresidential developments create new jobs, and some of these jobs will pay wages below what is required for a worker to afford a market-rate housing unit in the City. The nexus between the number of low- wage jobs and the subsidy needed to fund the gap between the housing costs and what they can afford is the basis for the fee.
Inclusionary Housing is a flexible to ol that cities can tailor to local circumstances. There is no single model for inclusionary housing; rather, there are several best practices to consider when adopting an inclusionary housing zoning ordinance.
A common model is to require Inclusionary Hou sing within a new master -planned residential community or mixed-use residential development. In this model, a percentage of the new homes are deed-restricted to be affordable to lower-income households for a specified period, such as 55 years.
Depending on the City's requirements, the new homes may be provided in the form of rental housing that is deed -restricted to facilitate occupancy by lower -income renters or be available for purchase by lower-income buyers.
According to California law, inclusionary Housing programs must allow developers alternatives to providing on-site deed-restricted affordable housing. These methods can include:
Payment of an in-lieu fee to the City to facilitate affordable housing production Constructing an equivalent number of units at equivalent levels of affordability off -site but located within the City
Rehabilitation of deed-restricted units that are at the end of the deed -restricted period or in need of investment to meet health/safety standards Purchase of market-rate units for deed-restriction
Dedication of land (within the City) for future development of affordable housing
An essential part of Inclusionary Housing is being flexible and providing benefits to developers.
Successful programs offer multiple options for dev elopers to meet their requirements and provide benefits, such as zoning flexibility, to help offset the cost.
What are Affordable Housing Units?
"Affordable Housing" is generally defined as housing that is affordable based upon a monthly housing cost of 30% or less of the income of a low - or very-low-income (80% or 50% of area median income, respectively) household. The income figure for Solano County is updated annually by the US Department of Housing and Urban Development. The legal mechanism that ensures that the housing cost remains affordable to lower -income families is a deed restriction.
Without an effective legal mechanism, new homes that are constructed to meet a City's Inclusionary Housing requirement may transition to market rates. In Solano County, the median income for a family of four is $109,900 in 2025.
The City's Policy
Based on a detailed analysis of Fairfield and neighboring jurisdictions with similar population and housing cost characteristics, the City proposes an Inclusionary Hous ing Policy that analyzes the affordability gaps of properties that are targeted to very low to moderate -income households and proposes a fee that is 50% of that amount at the 5% inclusionary housing requirement levels.
Input for this approach was discussed and established at two City Council study sessions, one-on- one meetings with developers about feasibility considerations, developer orientations, and via written comments. Key features of the City Policy include the following:
Rental Housing Requirements
For all newly constructed multi-family rental developments with more than 10 units:
A minimum of 2.5% of the total units must be rented to very-low-income households and An additional 2.5% must be rented to low-income households.
Ownership Housing Requirements
For all newly constructed owner -occupied units in residential or mixed -use developments of 10 or more units:
A minimum of 5% of the total units must be made available to moderate -income households.
Alternative Compliance Options
Per California state law, developers must be offered alternative methods for meeting inclusionary housing requirements. The City's policy includes the following options:
In-Lieu Fee
Developers may pay a fee, as outlined in the City's adopted fee schedule, in stead of constructing the required affordable units
All in -lieu fees must be deposited into the City's Housing Trust Fund, which is used exclusively to support affordable housing projects
Land Dedication
Developers may offer to dedicate or convey land to the City for future development of affordable housing. This offer must be irrevocable, and the land must meet criteria that make it suitable for affordable housing development.
This policy is designed to offer flexibility while ensuring Fairfield continues to meet its affordable housing goals. The City remains committed to working collaboratively with the development community to implement this policy effectively.
FINANCIAL IMPACT
Implementation of the Inclusionary Housing Ordinance has no financial impact.
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
Housing provided multiple opportunities for community members to offer feedback and input on the Inclusionary Housing Policy. In addition, staff held two study sessions with the council, during which the public was invited to share their comments. Staff also solicited input from developers. The councilmembers and the public have been carefully considered and thoughtfully incorporated into the development of the policy.
ALTERNATIVE ACTION
If the council rejects the Inclusionary Housing Policy, it may limit its ability to establish a consistent revenue stream to support current and future affordable housing initiatives.
COORDINATED WITH
City Attorney’s Office
STAFF CONTACT
LaTanya Terrones, Sr. Project Manager
(707) 428-7454
[email protected]
ATTACHMENTS
Attachment 2: Proposed Resolution - Commercial Linkage Fee Attachment 3: Proposed Resolution - In-lieu Fee Schedule Attachment 4: Exhibit A - In-Lieu Fee Schedule
Attachment 5: Proposed Ordinance - Inclusionary Housing Attachment 6: Fairfield Commercial Linkage Fee and Nexus Study Attachment 7: Fairfield Inclusionary Housing Lieu Fee Feasibility Study