Council Packet — Hayward City Council, March 28, 2023 (part 2 of 3)

1. How concerned are you by the possibility of your neighborhood being impacted by a natural disaster? (Likert scale; not at all concerned to very concerned)

2. Have you taken any action to prepare your home, your family, or yourself for the effects of a natural disaster? (For example: retrofitting your home, assembling an emergency kit, or taking a CPR class) (Y/N)

3. What have you and your family done to prepare for a natural disaster? (check boxes w/option)

• Created an emergency plan
• Practiced duck, cover, and hold
• Stored 72 hours’ worth of water
• Have emergency food supply to last 72 hours
• Picked an out-of-state emergency contact
• Made copies of important documents
• Purchased a First Aid kit
• Secured household hazards (strapped water heater, bolted bookshelves, affixed objects and picture frames with Museum Wax)
• Joined a Community Emergency Response Team (CERT)
• Other:

4. How prepared do you feel for a natural disaster? (Likert scale w/ comment; not at all prepared to very prepared)

5. Where do you get information about how to protect your family, your home, and yourself from natural disasters? (Check boxes, option to select multiple)

• News media
• Government agency
• Insurance agent or company
• Utility company
• University or research institution
• American Red Cross
• Church/religious organization
• Other non-profits,
• Other:

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Disaster Preparedness Priorities

6. Please rank the list of hazards below in order of highest concern to you. For example, put “earthquake” at #1 if you are most concerned about an earthquake happening in Hayward. (Ranked list)

• Earthquake
• Flood
• Landslide
• Wildfire
• Drought
• Severe Weather/Winter Storms
• Hazardous Materials Release
• Tsunami
• Other:

7. There are a number of strategies our community can use to decrease the damage caused by natural disasters. Most of these strategies fit in to the categories described below. Please rank them in order of your preference, where #1 is the one you prefer the most, and #6 is the one you prefer the least. (Ranked list)

• Prevention: regulate what kinds of buildings are built and where to limit the damage caused by a natural disaster. Example: requiring new buildings along the fault to have earthquake safe construction.

• Property Protection: modify existing buildings to protect them from a disaster or remove them from a hazard area. Example: earthquake retrofits.

• Natural Resource Protection: lower the risk of a natural disaster by protecting open space and natural habitats. Example: planting along the hillside to prevent landslide.

• Structural Projects: lessen the impact of the disaster by interrupting the natural progression of the disaster. Example: building retaining walls to prevent landslide.

• Emergency Services: protect people and property immediately after a disaster happens. Example: training city employees and residents to respond to emergencies.

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• Public Education & Awareness: inform residents and community members about disasters and what they can do to protect their families, their homes, and themselves. Example: providing preparedness training for residents and businesses.

8. The City of Hayward is limited in the number and size of natural disaster prevention projects we can complete in the next five years. Please rank the types of projects below, with what you think is most important at #1, and what you think is least important at #3. (Ranked list)

• Projects that impact the largest number of people, even if they only reduce their disaster risk by a little bit
• Projects that impact the people most likely to experience the effects of a disaster • Projects that impact the people most likely to have difficulty recovering from a disaster
• Other:

9. Is there anything else you think the City of Hayward should consider when deciding how to prepare for natural disasters? (Comment field)

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Soft story buildings contain apartments built over large, open areas like parking garages or retail space. In the event of an earthquake, these buildings are expected to cause the largest loss of life. Rough estimates place the number of soft story buildings in Hayward at approximately 900.

Retrofitting these buildings will help reduce the number of deaths caused by an earthquake.

10. Based on the description above, do you think you may live or work in a soft story building? (Y/N/IDK)

11. Oakland, San Francisco, Berkeley, and Alameda have all required owners of confirmed soft story structures to reinforce their buildings. Do you think the City of Hayward should consider a similar requirement? (Y/N)

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12. Is your home on a FEMA-designated floodplain? (Y/N/IDK)

13. Do you have flood insurance? (Y/N/IDK)

14. If you do not have flood insurance, why not? (Radio buttons)

• I am not located in floodplain
• I am located in a floodplain but insurance is not required

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• It’s not necessary, it never floods
• It’s not necessary, my home is elevated
• I have other protection
• It’s too expensive
• Other

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15. Have you or someone in your household directly experienced a natural disaster (such as earthquake, wildfire, flood, etc.) in Hayward in the past five years? (Y/N)

16. If yes, what kind? (Text field)

17. What is your relationship to Hayward? (Check boxes)

• I work in Hayward
• I go to school in Hayward
• I live in Hayward
• I own property or a business in Hayward
• None of these

18. Where do you live in Hayward? (Check boxes)

• I do not live in Hayward
• West of I-880
• East of I-880
• North of Jackson
• South of Jackson

19. What kind of home do you live in? (Radio buttons)

• Apartment
• Condo
• House
• Duplex
• Mobile home
• Group home (including retirement home, nursing facility, etc.) • Other:

20. How old are you? (Radio buttons)

• Under 18

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• 19-24
• 25-34
• 35-49
• 50-64
• 65-79
• Over 80

21. What ethnic group do you consider yourself a part of or feel closest to? (Radio buttons)

• African-American/Black
• American-Indian/Alaskan Native
• Asian-American
• Caucasian/White
• Latin@/Hispanic
• Native Hawaiian/Pacific Islander
• Two or more races
• Other

22. What is the last grade level you completed in school? (Radio buttons)

• Elementary school
• Middle school
• Some high school
• High school graduate or equivalent
• Some college
• Technical/Vocational school or Associate’s degree
• Bachelor’s Degree
• Graduate or professional degree (including DDS, JD, LLM, MA/MA, MBA, MD, PhD)
2021 SURVEY
The same survey questions were utilized in the 2021 update survey and sent to the same City mailing list to determine how answers and community priorities changed over time.

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APPENDIX F: SURVEY RESULTS

2021 SURVEY RESULTS
The same 2015 survey questions were utilized in the 2021. From October 7 to October 27, 2021, the survey was posted a total of 71 times across City of Hayward and Hayward Fire Department social media accounts (Twitter, Instagram, and Facebook) and received approximately 15,800 impressions.

There were 681 responses to the English language survey and 19 responses to the Spanish language surveys. These well exceeded the 2015 responses, which totaled 279. Response data combined from both Spanish and English surveys is provided in the tables below.

Table D-1. 2021 Public Survey Results Question 1
How concerned are you by the possibility of your neighborhood being impacted by a natural disaster?
Response 1 Response 2 Response 3 Response 4
Not at all concerned Moderately
concerned
Very concerned Other/No answer
11 229 157 304
Percentage of Replies
2% 33% 22% 43%
Approximate Change from 2015
+2% -4% -28% +23%

Table D-1. 2021 Public Survey Results Question 2
Have you taken any action to prepare your home, your family, or yourself for the effects of a natural disaster? (For example: retrofitting your home, assembling an emergency kit, or taking a CPR class)
Response 1 Response 2 Response 3
Yes No Other/No answer
369 151 181
Percentage of Replies
53% 22% 26%
Approximate Change from 2015
-17% -8% Not available

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Table D-1. 2021 Public Survey Results Question 3 part 1 What have you and your family done to prepare for a natural disaster? Response 1 Response 2 Response 3 Response 4 Response 5 Response 6 Created an
emergency
plan
Practiced
duck, cover,
and hold
Stored 72
hours' worth
of water
Have an
emergency
food supply
to last 72
hours
Picked an
out-of-state
emergency
contact
Made copies
of important
documents
257 158 391 444 196 199
Percentage of Replies
37% 23% 56% 63% 28% 28%
Approximate Change from 2015
-4% -9% -6% +2% -8% +1%

Table D-1. 2021 Public Survey Results Question 3 part 2 What have you and your family done to prepare for a natural disaster? Response 7 Response 8 Response 9 Response 10
Purchased a
First Aid kit
Secured
household
hazards
(bolted
bookshelves,
strapped
water heater)
Joined a
Community
Emergency
Response
Team (CERT)
Other (please specify)
433 325 43 Earthquake retrofits, go bags, taken CPR course, stored medication and pet food, filled vehicle gas
tanks, emergency kit preparation, creation of
defensible space around home, fire extinguisher
installation, gas main earthquake shutoffs,
neighborhood disaster planning, generator backup
power, home hardening against wildfire
Percentage of Replies
62% 46% 6% Not applicable
Approximate Change from 2015
+6% -4% -5% Not applicable

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Table D-1. 2021 Public Survey Results Question 5
How prepared do you feel for a natural disaster?
Response 1 Response 2 Response 3
- Not at all prepared - Moderately prepared Very prepared 119 349 29
Percentage of Replies
17% 50% 4%
Approximate Change from 2015
-3% +8% +3%

Table D-1. 2021 Public Survey Results Question 6
Where do you get information about how to protect your family, your home, and yourself from natural disasters?
Response 1 Response 2 Response 3 Response 4 Response 5 Response 6 News media Government
agency
Insurance
company or
agent
Utility
company
University or
research
institution
American Red
Cross
476 319 123 261 50 123
Percentage of Replies
68% 46% 18% 37% 7% 18%
Approximate Change from 2015
-9% -6% +2% +2% -2% -11%

Table D-1. 2021 Public Survey Results Question 3 part 2 Where do you get information about how to protect your family, your home, and yourself from natural disasters?
Response 7 Response 8 Response 9 Response 10
Church/religious
organizations
Other non-
profits
Other (please
specify)
Other (please specify)
48 54 68 Personal research, common sense, internet,
employer programs, mail, environmental
organizations, friends, Library
Percentage of Replies
7% 8% 10% Not applicable
Approximate Change from 2015

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-1% -2% - - Not applicable

Table D-1. 2021 Public Survey Results Question 7
Please rank the list of hazards below in order of highest concern to you. For example:
put "earthquake" at #1 if you are most concerned about an earthquake happening in Hayward?
Earthquake Ranked #1 concern by 73% of respondents
Flood Ranked #1 by 1% of respondents. Most (20%) respondents ranked flood #7 concern Landslide Ranked #1 by 1% of respondents. Most (17%) respondents ranked landslide #7 concern
Wildfire Ranked #1 by 14% of respondents. Most (27%) respondents ranked wildfire #2 concern
Drought Ranked #1 by 7% of respondents. Most (27%) respondents ranked drought #3 concern
Severe
Weather/Winter
Storms
Ranked #1 by 0.1% of respondents. Most (20%) respondents ranked severe weather/winter storms #4 concern
Hazardous
Materials
Releases
Ranked #1 by 0.1% of respondents. Most (20%) respondents ranked hazardous materials releases #7 concern
Tsunami Ranked #1 by 0.5% of respondents. Most (48%) respondents ranked tsunami #8 concern

Table D-1. 2021 Public Survey Results Question 8
There are a number of strategies our community can use to decrease the damage caused by natural disasters. Most of these strategies fit into the categories described below. Please rank them in order of your preference, where #1 is the one you prefer the most, and #6 is the one you prefer the least.

Prevention: regulate
what kinds of
buildings are built
and where
Ranked #1 concern by 17% of respondents. Most (18%) respondents ranked prevention #2 strategy
Property Protection:
modify existing
buildings
Ranked #1 by 17% of respondents. Most (18%) respondents ranked property protection #3 strategy
Natural Resource
Protection: protecting
open space and
natural habitats
Ranked #1 by 12% of respondents. Most (19%) respondents ranked natural resource protection #6 strategy
Structural Projects:
lessen the impact of
Ranked #1 by 6% of respondents. Most (24%) respondents ranked wildfire #6 strategy

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the disaster by
interrupting the
natural progression
Emergency Services:
protect people and
property immediately
after a disaster
happens.

Most (23%) respondents ranked emergency services #1 strategy Public Education &
Awareness
Most (20%) respondents ranked public education #1 strategy

Table D-1. 2021 Public Survey Results Question 9
The City of Hayward is limited in the number and size of natural disaster prevention projects we can complete in the next five years. Please rank the types of projects below, with what you think is most important at #1, and what you think is least important at #3
Projects that impact
the largest number of
people, even if they
only reduce their
disaster risk by a little
bit
Ranked #1 disaster prevention project by 19% of respondents. Most (51%) respondents ranked projects that impact the largest number of people #3 project type
Projects that impact
the people most likely
to experience the
effects of a disaster
Ranked #1 disaster prevention project by 51% of respondents.

Projects that impact
the people most likely
to have difficulty
recovering from a
disaster
Ranked #1 by 25% of respondents. Most (40%) respondents ranked projects that impact the people most likely to have difficulty recovering from a disaster #2 project type

Table D-1. 2021 Public Survey Results Question 10
Is there anything else you think the City of Hayward should consider when deciding how to prepare for natural disasters?
Open ended question,
received the following
representative
responses:
• Establish official gathering locations and support stations for after disasters
• Increased Community and Fire Department involvement in CERT training
• Donated earthquake preparation services for the elderly • Proactive projects and education to protect communities that would have the hardest time recovering

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• Increased communication with non-English and non-Spanish speakers
• Emphasize personal responsibility for disaster preparation through public service announcements
• Improving evacuation routes
• Development of tips for disaster preparedness specific to people living in small spaces (e.g. how/where to store sufficient water) • Stop building near the Hayward Fault and in Hayward Hills • Spread awareness of the emergency alert system
• Train all teachers and school staff in CPR
• Financial assistance for earthquake retrofitting
• Reduced carbon emissions as disaster prevention
• Plan for looting prevention following a disaster
• Plan for homeless persons support following disasters • Earthquake alerts through televisions
• Disaster preparation curriculum for schools
• Reducing building density
• Have disaster drills for City staff, residents, businesses, schools • Reducing the crime rate to allow police to focus on natural disaster response
• Backup City power and water supply
• Increased education via flyers at city buildings, mailed newsletters, Hayward “Stack,” dedicated website, and at City Council meetings • Prepare plan for management of disaster debris
• Incentivize disaster preparation via means such as tax credits • Provide emergency kits for low income families
• Utilize drones for faster information and alerts during disasters • Use wetlands as a flood buffer
• Relax parking restrictions on RV's & campers. They will be invaluable in an emergency
• Provide mental health support

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Table D-1. 2021 Public Survey Results Question 11
Based on the description above, do you think you may live or work in a soft story building?
Response 1 Response 2 Response 3
Yes No I Don’t Know
61 556 56
Percentage of Replies
9% 79% 8%
Approximate Change from 2015
-3% 0% +1%

Table D-1. 2021 Public Survey Results Question 12
Oakland, San Francisco, Berkeley, and Alameda have all required owners of confirmed soft story structures to reinforce their buildings so that they are safer in an earthquake.

Do you think the city of Hayward should consider a similar requirement? Response 1 Response 2
Yes No
605 60
Percentage of Replies
86% 9%
Approximate Change from 2015
-4% +1%

Table D-1. 2021 Public Survey Results Question 13
Is your home on a FEMA-designated floodplain?
Response 1 Response 2 Response 3
Yes No I Don’t Know
29 356 270
Percentage of Replies
4% 51% 39%
Approximate Change from 2015
0% -3% -1%

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Table D-1. 2021 Public Survey Results Question 14
Do you have flood insurance?
Response 1 Response 2 Response 3
Yes No I Don’t Know
45 506 101
Percentage of Replies
6% 72% 14%
Approximate Change from 2015
-2% -8% +4%

Table D-1. 2021 Public Survey Results Question 15
If you do not have flood insurance, why not?
Response 1 Response 2 Response 3 Response 4 Response 5 Response 6 I am not
located in a
floodplain
I am located in
a floodplain,
but insurance
is not required
It's not
necessary; it
never floods
It's not
necessary;
my home is
elevated
I have other
protection
It's too
expensive
313 14 61 59 8 69
Percentage of Replies
45% 2% 9% 8% 1% 10%
Approximate Change from 2015
-14% +1% -1% -5% -1% -3%

Table D-1. 2021 Public Survey Results Question 16
Have you or someone in your household directly experienced a natural disaster (such as an earthquake, wildfire, flood, etc.) in Hayward in the past five years? Response 1 Response 2
Yes No
110 536
Percentage of Replies
16% 77%
Approximate Change from 2015
-8% +2%
Disasters reported in last 5 years were primarily small earthquakes, wildfire (including regional smoke impacts), and flooding

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Table D-1. 2021 Public Survey Results Question 17
If you do not have flood insurance, why not?
Response 1 Response 2 Response 3 Response 4 Response 5
I work in
Hayward
I go to school
in Hayward
I live in Hayward I own property in
Hayward
None of these
139 32 586 386 19
Percentage of Replies
20% 5% 84% 55% 3%
Approximate Change from 2015
-9% -3% -2% -1% +2%

Table D-1. 2021 Public Survey Results Question 18
Where do you live in Hayward?
Response 1 Response 2 Response 3 Response 4 Response 5
I do not live
in Hayward
West of I-880 East of I-880 North of Jackson South of Jackson 34 129 399 155 218
Percentage of Replies
5% 18% 57% 22% 31%
Approximate Change from 2015
-3% +6% -11% -5% -8%

Table D-1. 2021 Public Survey Results Question 19
What kind of home do you live in?
Response 1 Response 2 Response 3 Response 4 Response 5 Response 6 Apartment Condo House Duplex Mobile Home Group home
(including
retirement
home,
nursing
facility, etc.)
44 66 476 19 22 3
Percentage of Replies
6% 9% 68% 3% 3% 0.4%
Approximate Change from 2015
-1% -1% -8% +1% -1% 0%

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Table D-1. 2021 Public Survey Results Question 20
How old are you?
Response 1 Response 2 Response 3 Response 4 Response 5 Response 6 0-24 25-34 35-49 50-64 65-79 Over 80
12 53 156 204 195 23
Percentage of Replies
2% 8% 22% 29% 28% 3%
Approximate Change from 2015
+1% -4% 0% -8% +5% 0%

Table D-1. 2021 Public Survey Results Question 21
What ethnic group do you consider yourself to be a part of or feel closest to? Response
1 Response 2 Response
3 Response
4 Response
5 Response 6 Response 7
African-
American/
Black
American
Indian/Alaska
n Native
Asian-
American
Caucasian
/White
Latino(a)/
Hispanic
Native
Hawaiian/P
acific
Islander
Two or more
races
46 5 113 291 99 5 55
Percentage of Replies
7% 0.1% 16% 42% 14% 0.1% 8%
Approximate Change from 2015
0% -1% +8% -19% +3% -2% -2%

Table D-1. 2021 Public Survey Results Question 22
What is the last grade level you completed in school?
Response 1 Response 2 Response 3 Response 4 Response 5
Elementary
school -Middle
school
High school Some
college/vocational
school or
Associate's Degree
Bachelor’s
degree
Graduate or
professional degree
5 41 186 219 187
Percentage of Replies

0.1% 6% 27% 31% 27%
Approximate Change from 2015
0% +30% -6% 0% 0%

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2015 SURVEY RESULTS

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Appendix G: Flyers

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APPENDIX H: WEBSITE

(2021 update: the web site taken down following completion of the initial 2015 survey)

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Appendix I: Community Meetings & Events

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2021 Update: Due to concerns about public gatherings during the two year Covid-19 pandemic no community meetings were held as part of the 2021 update. Community members were able to provide any new comments via the public survey and email.

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APPENDIX J: PUBLIC COMMENT PERIOD
In 2015 the initial Hayward Local Hazard Mitigation Plan was posted on the dedicated LHMP update website for public review. The public review period was advertised through social media and an existing list of survey respondents who requested to be further involved in the process.

The public comment period was open from Tuesday, February 16th through Wednesday, February 24th. The comments below were received.

The following comments were posted on Nextdoor:

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(2021 update: No new public comments were received on the 2021 update, likely because the 2015 effort was a large, new plan for the City and little has changed with respect to hazard mitigation other than the progress made on all mitigation projects.)

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APPENDIX K: UPDATES TO 2015 LHMP STRATEGIES
For the sake of simplicity and clarity, LHMP mitigation strategies that could be easily combined into a single category were. Existing programs were confirmed and removed from update forms to streamline the process. Mitigation strategies that had been categorized as “not applicable”, “not appropriate”, or assigned to another jurisdiction were removed from the plan update. “Soft” strategies that required “knowing”, “acknowledging”, “recognizing”, or immaterially “supporting” as their central action were also removed, as they had been completed by the adoption of the 2010 multijurisdictional plan.

The remaining mitigation strategies were divided by responsible department and provided to each department for status updates.

The results of this update have been compiled and are listed below. Please note that the 2021 status is the reported status by department, not the result of the mitigation strategy selection and prioritization process undertaken for the 2021 plan update.

Ongoing programs will continue to be supported and are considered to be mitigation strategies included in this plan. 2009
Code Description 2009 Status 2021 Status
HEAL-b-1
HEAL-b-2
HEAL-b-3
Identify and work with ancillary health-related facilities to develop mitigation and business continuity plans High Priority Moderate Priority ENVI-b-3 Adopt & enforce land use policies that reduce sprawl, preserve open space, and create walkable compact urban communities High Priority Ongoing ENVI-b-13 Help educate the public about reducing global warming High Priority Ongoing ENVI-b-12 Maintain healthy urban forests High Priority Ongoing ENVI-b-4 Promote alternative transportation options High Priority Ongoing ECON-c-2
ECON-d-3
Offer 1+ of the following to incentivize retrofits: waivers/reduction of permit fees, below-market loans, local tax breaks, grants, land use waivers, TA Low Priority High Priority ECON-d-1
HSNG-e-2
Inventory non-ductile, tilt-up, and other vulnerable concrete buildings Low Priority Low Priority ECON-b-3
HSNG-c-3
Educate owners/staff/engineers/contractors on soft-story retrofit procedures and incentives Low Priority Under Review

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GOVT-c-2 Encourage employees to have a family disaster plan Moderate Concern High Priority HEAL-a-1
HEAL-a-2
HEAL-a-3
HEAL-a-4
HEAL-a-5
HEAL-a-6
HEAL-a-7
Work with local hospitals to ensure structural adequacy, establish BORP, continuity of care, and general disaster preparedness
Moderate Concern Moderate Priority
ECON-j-3 Work with private businesses to develop continuity plans Moderate Concern Moderate Priority GOVT-c-15 Conduct periodic tests of the alerting and warning system Moderate Concern Ongoing GOVT-d-9 Conduct/promote attendance at local or regional hazard conferences, events, and workshops Moderate Concern Ongoing
HSNG-g-4 Create or ID model properties showing defensible space and structural survivability in wildland-urban interface or fire threatened communities Moderate Concern Ongoing GOVT-d-1 Promote interjurisdictional information sharing Moderate Concern Ongoing LAND-b-1 Require new homes in fire-threatened communities to be constructed of fire- resistant materials and incorporate fire-resistant design Moderate Concern Ongoing HSNG-k-10 Train homeowners to locate and shut off gas valves if they smell or hear gas leaking Moderate Concern Ongoing HSNG-g-11 Work with residents in rural-residential areas to ensure adequate plans are developed for access/evacuation in wildland interface communities Moderate Concern Ongoing GOVT-c-18 Establish regional protocols for response to NOAA Monterey weather forecasts Moderate Concern Under Review GOVT-c-9 Purchase command vehicles for EOC if current vehicles are unsuitable/inadequate Moderate Concern Under Review LAND-a-5 Consider imposing Alquist-Prioto regulations on buildings essential to economic recovery New Not Yet
Considered
LAND-a-4 Ensure development near faults with history of complex surface rupture has setback >50 ft. New Ongoing
GOVT-c-10 Maintain EOC in state of readiness Not funded Underfunded HEAL-c-4 Plan for hazardous materials issues related to a natural disaster Not Yet Considered Moderate Priority

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ENVI-a-8 Require hazardous materials in the flood zone be elevated/protected Not Yet Considered Moderate Priority
GOVT-a-3,
INFR-b-9
Clarify the extent to which critical facilities are expected to perform at a life safety level or remain functional
Not Yet
Considered
Not Yet
Considered
GOVT-b-5 Create emergency relocation plan for recovery - critical government facilities Not Yet Considered
Not Yet
Considered
INFR-b-10 Develop a water-based transportation system across the Bay Not Yet Considered
Not Yet
Considered
INFR-a-10 Develop pedestrian rights-of-way as walkways for additional evacuation routes Not Yet Considered
Not Yet
Considered
HSNG-g-21 Work with insurance companies to create a PPI to provide discounts on insurance premiums for residents who mitigate hazards to a set standard Not Yet
Considered
Not Yet
Considered
LAND-f-4 Work with non-profits and others to protect areas susceptible to extreme hazards through open space preservation
Not Yet
Considered
Not Yet
Considered
HSNG-h-10
HSNG-k-4
Develop a public education campaign on the cost, risk, and benefits of earthquake, flood, and other hazard insurance as compared to mitigation Not Yet
Considered
Not Yet
Considered
LAND-g-1
ECON-e-7
ECON-e-8
HSNG-g-10
Establish special funding (fire abatement district) for mitigation (vegetation management, high fire danger patrols) Not Yet
Considered
Not Yet
Considered
ECON-f-7
HSNG-h-8
Encourage private landowners to participate in building elevation programs within floodplain
Not Yet
Considered Ongoing
GOVT-c-3
INFR-g6
Offer CERT to employees Not Yet
Considered Ongoing
GOVT-c-1 Develop plan for short-term and long-term sheltering of employees Not Yet Considered Under Review
ECON-e-11
HSNG-g-19
ID and manage gas-related risks of soft-story mixed-use buildings (work with State Fire Marshal, PEER, etc.)
Not Yet
Considered Under Review

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INDFR-d-1
INFR-d-3
Conduct a watershed analysis to determine areas of insufficient capacity in storm drain and natural creek systems Ongoing Not Yet
Considered
INFR-d-5 Pursue funding for the design and construction of storm drainage projects to protect vulnerable properties Ongoing Not Yet
Considered
ECON-b-1
ECON-d-2
HSNG-c-2
HSNG-e-3
Adopt 2009 International Existing Building Code
Ongoing Ongoing
HSNG-b-1 Adopt a retrofit standard including plan sets and construction details for bolting homes to foundations and strengthening cripple walls Ongoing Ongoing ECON-e-4
ECON-h-1
HSNG-f-1
HSNG-g-6
HSNG-i-1
Adopt, amend, and enforce updated versions of CA Building and Fire Code Ongoing Ongoing
ECON-f-6
HSNG-h-6
Apply floodplain management regulations for private development in the floodplain/floodway Ongoing Ongoing
ECON-a-1
HSNG-a-1
Assist in enforcing hazard disclosure requirements by working with real estate agents Ongoing Ongoing ENVI-a-6 Comply with National Pollution Discharge Elimination System permit Ongoing Ongoing INFR-d-7 Continue maintenance efforts to keep waterways clear while retaining vegetation Ongoing Ongoing INDFR-d-6
INFR-d-7
Continue to repair, keep clear, and make structural improvements to storm drains, pipelines, etc. as part of regular maintenance activities Ongoing Ongoing INFR-d-14 Determine vulnerability of wastewater treatment plants to flooding and take mitigation measures Ongoing Ongoing
HSNG-a-3 Develop a plan w/ Red Cross for short-term shelter of residents Ongoing Ongoing INFR-d-9 Develop a watercourse bank protection strategy (assessment, stabilization, depth management, and removal of coffer dams) Ongoing Ongoing

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INFR-d-2 Develop watershed analysis procedures for new developments to determine downstream impacts Ongoing Ongoing
HSNG-b-4
HSNG-b-5
HSNG-f-2
Encourage local gov building inspectors and private contractors to take continuing education classes on retrofitting/plan set A/construction standards Ongoing Ongoing GOVT-d-8 Encourage staff to participate in efforts by professional orgs to mitigate disaster losses Ongoing Ongoing
ENVI-a-1 Enforce CEQA so hazard mitigation doesn't impact environment Ongoing Ongoing ENVI-a-3 Enforce CEQA to minimize air pollution Ongoing Ongoing LAND-a-1 Enforce requirement for site-specific geologic reports be prepared for development Ongoing Ongoing ENVI-a-9 Enforce/comply with California Certified Unified Program Agency hazardous materials requirements Ongoing Ongoing
INFR-c-7 Ensure adequate fire road access to developed and open space areas Ongoing Ongoing ECON-f-3
HSNG-h-3
Ensure private development pays for storm drain upgrades (impact fee) Ongoing Ongoing HSNG-h-7 Ensure utilities in new developments are constructed to minimize flooding and flood damage Ongoing Ongoing
INFR-d-13 Ensure utility systems in new developments are constructed in ways that reduce or eliminate flood damage Ongoing Ongoing
GOVT-b-3 Establish a goal for resumption of government services Ongoing Ongoing LAND-d-5 Establish zoning ordinances placing constraints on hillside development in areas where roads may be washed out due to landslide Ongoing Ongoing INFR-c-5 For new development, enforce 20-ft road width with 10-ft shoulder clearance on roads >50 ft in length Ongoing Ongoing
INFR-c-4 For new development, require at minimum a T intersection turnaround sufficient for wildfire equipment Ongoing Ongoing
INFR-d-11 ID critical locally-owned bridges effected by flooding and mitigate their vulnerability Ongoing Ongoing LAND a-3 Identify and require geologic reports in areas adjacent to locally-specific faults Ongoing Ongoing

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INFR-b-3 Include vulnerability to ground failure in criteria used for determining a pipeline replacement schedule Ongoing Ongoing
ECON-e-1 Increase fire mitigation in private developments through improving design, vegetation management, code enforcement, and public education Ongoing Ongoing ENVI-b-11 Increase recycling rates in local government operations and in the community Ongoing Ongoing ENVI-b-5 Increase use of clean, alternative energy Ongoing Ongoing ECON-c-1
HSNG-d-2
HSNG-d-3
HSNG-d-4
Maintain list of unreinforced masonry buildings and notify owners of structures on the list Ongoing Ongoing
GOVT-c-12 Maintain/update SEMS plan, NIMS plan, and submit NIMSCAST repost Ongoing Ongoing INFR-a-11 Minimize the likelihood that power interruptions with adversely impact critical utility systems or facilities Ongoing Ongoing
GOVT-c-17 Monitor weather during times of high fire risk Ongoing Ongoing GOVT-d-5
ECON-f-1
Participate in NFIP Ongoing Ongoing
ENVI-b-6 Prioritize energy efficiency through building code, retrofitting city facilities, urging employees to conserve Ongoing Ongoing
INFR-g-4
INFR-g-5
Provide materials to the public related to coping with reduction/contamination of water supply, disrupted storm drains, sewage lines, and wastewater treatment beyond statutory requirements
Ongoing Ongoing
HSNG-k-2
HSNG-k-3
Provide public education and outreach on emergency preparedness, hazard mitigation, and disaster response Ongoing Ongoing
LAND-c-4
ECON-f-1
Regulate construction within flood zones to comply with NFIP CRS Ongoing Ongoing GOVT-c-16 Regulate/enforce street address numbers and minimize naming of short streets leading to single homes Ongoing Ongoing
GOVT-d-4 Request FEMA update National Flood Insurance Program info/GIS maps to reflect mitigation measures Ongoing Ongoing

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HSNG-b-3 Require engineered plan sets for retrofitting of homes on steep hillsides Ongoing Ongoing ECON-b-1
HSNG-b-2
HSNG-c-1
Require engineered plan sets for retrofitting soft story buildings and two-story homes with living area over garages and split-level homes (those not covered by plan set A)
Ongoing Ongoing
HSNG-g-18 Require fire mitigation measures in homes (braced water heaters, flexible gas couplings, bolting homes to foundations, reinforcing cripple walls) Ongoing Ongoing HSNG-g-14 Require fire sprinklers in all mixed use development to protect residential uses from fires started in non-residential areas Ongoing Ongoing
HSNG-g-12 Require fire sprinklers in homes at wildland-urban interface or >1.5 miles/5-minute response time from a fire station Ongoing Ongoing
LAND-d-1 Require geotechnical/soil studies to prevent creating unstable slopes (Municipal Code Ch. 10, Article 8 - Grading and Clearing, CBC) Ongoing Ongoing LAND-d-3 Require grading permits/plans to control erosion/sedimentation prior to development approval (Municipal Code Ch. 10, Article 8 - Grading and Clearing, CBC) Ongoing Ongoing ECON-e-3
HSNG-g-3
Require new buildings be constructed of fire-resistant materials and use fire-resistant design Ongoing Ongoing
INFR-c-6 Require new development in high fire danger areas to provide adequate access roads, onsite fire protection, evacuation signage, and fire breaks Ongoing Ongoing LAND-a-8
LAND-d-2
Require review of geotechnical/soil studies be conducted by trained/credentialed personnel (Municipal Code Ch. 10, Article 8 - Grading and Clearing, CBC) Ongoing Ongoing LAND-d-1
Require site-specific geologic or geotechnical reports for re/development in areas subject to earthquake-induced landslides (BCB Reso 93-037 City of Hayward Hillside Design and Urban/Wildland Interface Guidelines, Subdivision Map Act) Ongoing Ongoing
HSNG-k-6 Sponsor community CERT training Ongoing Ongoing ECON-e-2
HSNG-g-2
Tie public education, defensible space ordinance to field enforcement Ongoing Ongoing HSNG-k-5 Use disaster anniversaries to remind the public of mitigation activities Ongoing Ongoing LAND-d-4 Use water management ordinances to control erosion/sedimentation (Municipal Code Ch. 10, Article 8 - Grading and Clearing, CBC) Ongoing Ongoing

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ENVI-a-11 When remodeling existing infrastructure, remove asbestos Ongoing Ongoing HSNG-g-8
INFR-c-1
INFR-c-2
Work to ensure reliable source of water for fire suppression Ongoing Ongoing
GOVT-d-7 Work with major employers/hazmat agencies to coordinate mitigation Ongoing Ongoing LAND-d-5 Zone for hillside development constraints especially in areas of existing landslide (Municipal Code Ch. 10, Article 8 - Grading and Clearing, CBC) Ongoing Ongoing ECON-i-5
HSNG-j-1
Develop a repair and reconstruction ordinance for damaged buildings following a disaster that requires simultaneous retrofit Ongoing Ongoing INFR-c-8 Maintain fire roads and/or public right-of-way roads and keep them passable at all times Ongoing Ongoing
HSNG-g-13 Require fire sprinklers in all new or substantially remodeled multifamily housing Ongoing Ongoing ECON-e-5
HSNG-g-7
Require smoke detector installation for finalizing permits or as a condition for the transfer of property Ongoing Ongoing
GOVT-d-6 Participate in multi-agency efforts to mitigate fire threat Ongoing Ongoing and Under Review
GOVT-b-4 Establish a recovery plan that specifies roles/priorities/responsibilities of departments and process for policy-making by elected/appointed Ongoing Underfunded INFR-b-1 Expedite funding/retrofit of seismically-deficient bridges and road structures Ongoing Underfunded ECON-e-10
HSNG-g-16
Conduct periodic fire safety inspections of privately-owned commercial, industrial, and multifamily buildings Under Study Ongoing
ECON-j-6
HSNG-k-13
Develop a maintain-a-drain type program Under Study Ongoing ECON-j-12
HSNG-k-15
Inform shoreline property owners of the possible long-term economic threat posed by rising sea levels Under Study Ongoing
ECON-a-2
HSNG-a-2
Create incentives for owners of historic/architecturally significant buildings to retrofit to minimize likelihood of demolition Under Study Under Review ECON-b-9 Provide technical assistance for seismically strengthening soft-story buildings Under Study Under Review

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ECON-e-9
HSNG-g-15
Create list of high-occupancy, high fire risk buildings for expedited inspection Under Study Underfunded ECON-c-3
ECON-c-4
HSNG-d-3
HSNG-d-4
Require owners of unreinforced masonry buildings to inform tenants and make them aware of any retrofitting Underfunded Complete
ECON-c-2 Work with owners to retrofit unreinforced masonry buildings (structural analyses, obtain funding, mandatory program, penalties) Underfunded Complete GOVT-c-25 Coordinate with Red Cross to ID facilities for distribution of supplies Underfunded Under Review LAND-f-2
LAND-f-3
Assist with retrofit of homes in older urban neighborhoods Underfunded High Priority ECON-b-4
HSNG-c-4
Conduct a soft-story inventory Underfunded High Priority ECON-j-3 Develop printed materials, outreach encouraging private business employees to have family disaster plans Underfunded High Priority
GOVT-c-6 Ensure emergency personnel have adequate radios/breathing apparatuses/protective gear/etc for disaster response Underfunded High Priority ECON-b-6
ECON-d-3
HSNG-b-9
HSNG-c-7
HSNG-e-4
Investigate/adopt appropriate financial/procedural/land use incentives to facilitate fragile building retrofits
Underfunded High Priority
ECON-i-1
ECON-i-2
ECON-i-3
ECON-i-4
Establish a Building Occupancy Resumption Program
Underfunded Low Priority
ECON-f-9 Require annual inspection of approved flood-proof buildings to ensure flood-proofing is in good conditions and key employees are aware of emergency plans Underfunded Not Yet Considered

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INFR-d-18 Use EPA criteria to inventory assets, condition, and necessary improvements through GIS to determine locations for creek monitoring gauges Underfunded Not Yet Considered
ECON-h-3 Let building owners know that seismic retrofits also protect against explosion, and air ducts can be designed to contain airborne biological contaminants Underfunded Not Yet Considered
GOVT-a-1 Assess vulnerability of critical facilities and make recommendations for appropriate mitigation Underfunded Ongoing
INFR-b-8 Comply with building code, fire code, and Alquist-Priolo Act when constructing or remodeling public buildings Underfunded Ongoing
HSNG-g-5 Consider fire safety/evacuation/emergency vehicle access when reviewing proposals for additions or second units in wildland-urban interface regions Underfunded Ongoing ECON-e-6
HSNG-g-1
INFR-c-3
Develop a defensible space vegetation program
Underfunded Ongoing
LAND-e-2 Discourage/mitigate/prevent new or major construction on slopes greater than set percentage Underfunded Ongoing
ECON-g-2
HSNG-i-2
Educate design professionals on landslide/erosion mitigation strategies Underfunded Ongoing ECON-j-9 Encourage formation of community- and neighborhood-based programs for wildfire education Underfunded Ongoing
INFR-d-8 Enforce provisions intended to keep waterways clear of obstructions to conform to Regional Water Quality Control Board's Best Management Practices Underfunded Ongoing INFR-a-9 Ensure critical intersection traffic lights function following loss of power Underfunded Ongoing LAND-c-3 Ensure development proposals by floodways referred to flood control/wastewater for review (consistent with NPDES) Underfunded Ongoing
INFR-a-1
INFR-a-20
Establish plans for delivery of fuel to/from critical infrastructure providers Underfunded Ongoing ECON-i-6
HSNG-j-2
Establish requirements for repair and reoccupancy of historically significant structures (shoring/stabilization, consult with preservationist, expedited permits) Underfunded Ongoing

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LAND-e-1 For new development, require a buffer between residential properties and landslide/wildfire hazard areas Underfunded Ongoing
ENVI-b-9 Increase fleet fuel efficiency, reduce # of fleet vehicles, convert diesel to bio-diesel, employee anti-idling education Underfunded Ongoing
GOVT-c-19 Increase local patrolling during high fire danger Underfunded Ongoing HSNG-k-3 Inform residents of comprehensive home mitigation activities through workshops, publications, and media announcements/events Underfunded Ongoing INFR-b-7 Install earthquake-resistant connections where pipes enter or exit bridges Underfunded Ongoing INFR-b-6 Install portable facilities to allow pipelines to bypass failure zones Underfunded Ongoing INFR-b-4 Install specially-engineered pipelines in areas vulnerable to earthquakes Underfunded Ongoing INFR-a-8 Pre-position emergency power generation capacity in critical buildings Underfunded Ongoing GOVT-a-12 Prior to acquisition of property for critical facilities, evaluate structural/site hazards Underfunded Ongoing LAND-f-1 Prioritize retrofit of infrastructure serving urban areas over outlying areas Underfunded Ongoing INFR-b-2 Prioritize retrofit over expansion of transportation and infrastructure systems Underfunded Ongoing ECON-f-4
ECON-f-5
HSNG-h-4
HSNG-h-5
Provide information, sandbags and plastic sheeting to residents and businesses at multiple locations in advance of a rainstorm, and deliver to vulnerable populations upon request Underfunded Ongoing
ENVI-b-7 Purchase only EnergyStar appliances for city use Underfunded Ongoing INFR-b-5 Replace or retrofit structurally deficient water retention structures Underfunded Ongoing LAND-b-1 Review new development for fire mitigation and safety Underfunded Ongoing ECON-j-5 Sponsor CERT training for employees of private businesses Underfunded Ongoing EDUC-b-1 Work with Red Cross, county, and non-profit to set up MOU for use of school facilities in a disaster Underfunded Ongoing
GOVT-c-13 Continue to participate in mutual aid/cooperative response agreements with neighboring jurisdictions Underfunded Ongoing
LAND-f-5 Create/preserve buffers between development and hazardous materials; mitigate existing areas w/o buffers Underfunded Ongoing

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LAND-b-2 Develop a regulatory framework for managing wildland-urban interface using best practices Underfunded Ongoing
ECON-j-13
HSNG-k-16
INFR-g-7
Develop/distribute culturally appropriate mitigation and preparedness materials Underfunded Ongoing
HSNG-g-9 Expand vegetation management to include chipping, mechanical fuel reduction equipment, goats, selective harvesting, and controlled burning Underfunded Ongoing GOVT-c-7 Participate in system of interjurisdictional communications Underfunded Ongoing HSNG-k-7 Include flood fighting technique session based on CA Dept of Water Resources training in CERT program Underfunded Under Review
GOVT-c-14 Install alert/warning systems for evacuation and shelter-in-place Underfunded Under Review GOVT-b-2 Prepare a basic Recovery Plan Underfunded Under Review ECON-b-5
HSNG-c-5
HSNG-c-6
Use inventory to require owners to inform existing/future tenants that they may live/work in a soft-story building Underfunded Under Review ECON-j-11 Encourage joint meetings of security/operations personnel at major private employers to develop ways to work together for increased safety and security Underfunded Underfunded INFR-a-12 Encourage undergrounding facilities through planning approval process Underfunded Underfunded GOVT-c-8 Harden emergency response communications Underfunded Underfunded LAND-c-2 Incorporate FEMA guidelines into plans/procedures for managing flood hazards Underfunded Underfunded HSNG-k-9
HSNG-k-12
Offer a tool lending library for mitigation activities
Underfunded Underfunded
INFR-a-4 Retrofit or replace vulnerable critical/lifeline infrastructure facilities and/or backup facilities Underfunded Underfunded
GOVT-a-2 Retrofit/replace vulnerable critical facilities Underfunded Underfunded

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INFR-d-12 Support or conduct the repair or replacement of levees vulnerable to collapse in an earthquake Underfunded Underfunded
INFR-a-21 Designate a backup EOC with redundant communications systems Underfunded Underfunded

APPENDIX L: MITIGATION STRATEGY EVALUATION FORM
Strategy
Name
Feasibility Social benefits*
Funding Political
support
Local
Champion Administrative Technical Legal Access Life
Safety Awareness Social
Capacity
Vulnerable
Residents Recreation
With
existing or
expected
funding
sources
Likelihood
of political
support
Supported
by a strong
advocate or
local
champion
With existing
operations or
procedures
With
existing
technology
or know-
how
With
existing
authorities
or policies
Protects
access to
jobs or
services
Protects
residents
lives and
prevents
injuries
Increases
public
awareness
Builds social
networks
and
community
capacity
Protects
especially
vulnerable
community
members
Maintains
recreational or
educational
opportunities

Scoring Key
+1 Criteria definitely met
0 Unsure/don't know
-1 Criteria not met/negative
effects

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Economic Benefits Environmental Improvement Community Objectives Total
Score
Jobs Commuter
Movement
Reduces
Disruptions
Reduces
Damage
Habitats
and
Biodiversity
Water
Quality GHG Water
Use
Energy
Use
Community
Objectives Existing Plans
Promotes
or retains
jobs
Maintains
commuter
movement
Reduces
service or
network
disruptions
Reduces
asset
damage,
e.g., to
structures or
infrastructure
Creates or
maintains
habitat and
biodiversity
Maintains
or
improves
water
quality
Reduces
GHGs
Reduces
water use
Reduces
energy use
Advances other
community objectives
Supports
existing plan
objectives, i.e.,
general plan
policies

Scoring Key
+1 Criteria definitely met
0 Unsure/don't know
-1 Criteria not met/negative
effects

CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: PH 23-015
DATE: March 28, 2023
TO: Mayor and City Council
FROM: Assistant City Manager

SUBJECT
Fiscal Year 2024 Master Fee Schedule: Adopt a Resolution Amending the Fiscal Year 2024 Master Fee Schedule to Update the Fees Associated with Administration of the Residential Rent Stabilization and Tenant Protection Ordinance, and Finding that the Action is Exempt from CEQA Review

RECOMMENDATION
That the City Council adopts a resolution (Attachment II) authorizing the amendment to the resolution adopted March 21, 2023, for the City of Hayward Fiscal Year 2024 Master Fee Schedule associated with the administration of the Residential Rent Stabilization and Tenant Protection Ordinance...End

SUMMARY
Hayward City Council adopted the Residential Rent Stabilization and Tenant Protection Ordinance (RRSO) in July 2019. The RRSO includes Section 12-1.17, which establishes that the costs of administering the RRSO shall be reimbursed in full through the imposition of a rent stabilization fee, paid annually with an amount recommended to Council by the City Manager and Housing Division. When the RRSO was adopted, Council authorized fees of $40 per Covered Rental Unit and $19 per Rental Unit.

Covered Rental Units have a higher per unit fee because they are covered under the rent increase threshold and rent dispute resolution provisions of the RRSO, which requires additional staff and consultant work to administer. Owners of Covered Rental Units may pass through half the cost of the fee to the tenants. Owners of Rental Units are not restricted by the City’sRRSO on increases that may cover the cost of the fee, though they may be subject to a State rent increase threshold.

The annual fee has not been increased since it was established in July 2019. The fee was developed based on best estimates for the number of Covered Rental Units and Rental Units in the City and the anticipated costs of implementing the RRSO. Since then, City Council adopted the Tenant Relocation Assistance Ordinance (TRAO) without an increase in fees to cover administrative costs. In recent years, administrative expenses have exceeded collected revenues. Staff has not recommended fee increases since FY 2020 due to increased economic constraints experienced by tenants and property owners during the peak of the COVID-19 pandemic. Other non-restricted housing funds were used to offset the RRSO and TRAO administration costs; however, it is no longer feasible to use other revenue funds to CITY OF HAYWARD Printed on 3/24/2023Page 1 of 3
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File #:PH 23-015
offset expenses.

Staff proposes increases to both the Covered Rental Unit and Rental Unit fees to account for the following administration expenses, which have substantially increased since the RRSO was adopted:
· Adjust staffing allocation to reflect actual time: City staff are currently allocating hours to the Rent Stabilization Fund that significantly exceed the planned allocation due to the substantial demand on staff time for implementing the RRSO and TRAO. By increasing staffing from 2.78 FTE to 4.0 FTE, the City will be able to meet the full administrative obligation of the RRSO and TRAO. · Increase consultant capacity: The City contracts with the non-profit Project Sentinel to manage the rent dispute resolution process, develop implementation resources and tools, and provide outreach and education support to Hayward community members. They have not increased their rates in several years and the City has seen an increase in petitions of nearly 50% from the first year of implementation to the most recent fiscal year. Increasing the contract with Project Sentinel will account for inflation and increased petition volume. · Increase marketing efforts: Through participation in the national 18-month Eviction Prevention Learning Lab, staff identified several opportunities for improving information accessibility, particularly for Hayward community members who are most challenging to reach by traditional means. By increasing the budget for marketing efforts, the City will better meet the obligation to advise tenants and landlords of their rights and responsibilities under the RRSO and TRAO.

Staff is not requesting an increase to the Mobile Home Space Rent Ordinance fee because the level of services is relatively unchanged. Based on analysis of the above expenses and current budget projections, staff recommends the following increases:

Proposed Fee Increase

MH RU CRU
FEE PER UNIT $5 $32 $66
INCREASE FROM FY 19 FEE $0 $13 $26
PERCENT TOTAL INCREASE 0% 68% 65%
TOTAL PROJECTED REVENUE $1,034,823
Legend: MH = Mobile Home Unit; RU = Rental Unit; CRU = Covered Rental Unit The Homelessness-Housing Task Force heard an informational report on this item on March 2, 2023, and requested staff bring this item to Council with additional information regarding the implementation of the RRSO, which is included in the Discussion section of this report. As demonstrated by the accomplishments described in the Discussion, implementation of the RRSO requires active enforcement by the City to ensure landlords and tenants understand their rights and responsibilities under the RRSO.

Such active enforcement increases awareness, ensuring landlords have the support they need to comply and tenants have the resources they need to advocate for themselves.

CITY OF HAYWARD Printed on 3/24/2023Page 2 of 3
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File #:PH 23-015

ATTACHMENTS
Attachment I Staff Report
Attachment II Resolution
Attachment III Benchmarking Research
CITY OF HAYWARD Printed on 3/24/2023Page 3 of 3
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DATE: March 28, 2023

TO: Mayor & City Council

FROM: Assistant City Manager

SUBJECT: Fiscal Year 2024 Master Fee Schedule: Adopt a Resolution Amending the Fiscal Year 2024 Master Fee Schedule to Update the Fees Associated with Administration of the Residential Rent Stabilization and Tenant Protection Ordinance, and Finding that the Action is Exempt from CEQA Review

RECOMMENDATION

That the City Council adopts a resolution (Attachment II) authorizing the amendment to the resolution adopted March 21, 2023, for the City of Hayward Fiscal Year 2024 Master Fee Schedule associated with the administration of the Residential Rent Stabilization and Tenant Protection Ordinance.

SUMMARY

Hayward City Council adopted the Residential Rent Stabilization and Tenant Protection Ordinance (RRSO) in July 2019. The RRSO includes Section 12-1.17, which establishes that the costs of administering the RRSO shall be reimbursed in full through the imposition of a rent stabilization fee, paid annually with an amount recommended to Council by the City Manager and Housing Division. When the RRSO was adopted, Council authorized fees of $40 per Covered Rental Unit and $19 per Rental Unit. Covered Rental Units have a higher per unit fee because they are covered under the rent increase threshold and rent dispute resolution provisions of the RRSO, which requires additional staff and consultant work to administer. Owners of Covered Rental Units may pass through half the cost of the fee to the tenants. Owners of Rental Units are not restricted by the City’s RRSO on increases that may cover the cost of the fee, though they may be subject to a State rent increase threshold.

The annual fee has not been increased since it was established in July 2019. The fee was developed based on best estimates for the number of Covered Rental Units and Rental Units in the City and the anticipated costs of implementing the RRSO. Since then, City Council adopted the Tenant Relocation A ssistance Ordinance (TRAO) without an increase in fees to cover administrative costs. In recent years, administrative expenses have exceeded collected revenues. Staff has not recommended fee increases since FY 2020 due to increased economic constraints experienced by tenants and property owners during the peak of the COVID -19 pandemic. Other non -restricted housing funds were used to offset the RRSO and TRAO administration costs; however, it is no longer feasible to use other revenue funds to offset expenses.

Page 2 of 10 ends

Staff proposes increases to both the Covered Rental Unit and Rental Unit fees to account for the following administration expenses, which have substantially increased since the RRSO was adopted:
 Adjust staffing allocation to reflect actual time : City staff are currently allocating hours to the Rent Stabilization Fund that significantly exceed the planned allocation due to the substantial demand on staff time for implementing the RRSO and TRAO. By increasing staffing from 2.78 FTE to 4.0 FTE, the City w ill be able to meet the full administrative obligation of the RRSO and TRAO.
 Increase consultant capacity : The City contracts with the non -profit Project Sentinel to manage the rent dispute resolution process, develop implementation resources and tools, and provide outreach and education support to Hayward community members. They have not increased their rates in several years and the City has seen an increase in petitions of nearly 50% from the first year of implementation to the most recent fiscal year. Increasing the contract with Project Sentinel will account for inflation and increased petition volume.  Increase marketing efforts : Through participation in the national 18 -month Eviction Prevention Learning Lab, staff identified several opportunities for improving information accessibility, particularly for Hayward community members who are most challenging to reach by traditional means. By increasing the budget for marketing efforts, the City will better meet the obligation to advise tenants and landlords of their rights and responsibilities under the RRSO and TRAO.

Proposed Fee Increase

The Homelessness-Housing Task Force heard an informational report on this item on March 2, 2023, and requested staff bring this item to Council with additional information regarding the implementation of the RRSO, which is included in the Discussion section of this report. As demonstrated by the accomplishments described in the Discussion, implementation of the RRSO requires active enforcement by the City to ensure landlords and tenants understand their rights and responsibilities under the RRSO. Such active enforcement increases awareness, ensuring landlords have the support they need to comply and tenants have the resources they need to advocate for themselves.

BACKGROUND

Page 3 of 10 ends

In July 2019, City Council adopted the Rent Stabilization and Tenant Protection Ordinance (RRSO; Ordinance No. 19 -12).1 Section 12-1.17 of the RRSO establishes that the costs of administering the RRSO shall be reimbursed in full through the imposition of a rent stabilization fee, paid annually with an amount recommended to Council by the City Manager and Housing Division. At the time of adoption, the following fees were established:

Table 1. Current Rent Stabilization Fee
Description FY 19-20
Rates
Annual Fee per Covered Rental Unit $40
Annual Fee per Rental Unit $19

Covered Rental Units are those covered by the rent increase threshold provision of the RRSO.

The fee is greater than Rental Units, which are not covered by the rent increase threshold, because additional resources are required to administer the rent review process. Owners of Covered Rental Units may pass through half the cost of the fee to the tenants . Owners of Rental Units are not restricted by the City’s RRSO on increases that may cover the cost of the fee, though they may be subject to a State rent increase threshold. The above fee amounts were calculated in FY 2020 using the following key assumptions:
 Staffing and supplies and services expenses that cannot explicitly be attributed to administration of the Rent Review Program for Covered Rental Units were distributed proportionally by rental unit based on the proportion of Covered Rental Units (43%) and Rental Units (57%) at the time of the calculation.  Supplies and services directly related to administering the Rent Review Program for Covered Rental Units (such as the costs of specific marketing activities and the contract for the mediation and arbitration consultant, Project Sentinel) were distributed 95% to Covered Rental Units and 5% to Rental Units, as a small proportion of the consultant’s education activities benefit tenants and landlords for both unit types.

In July 2020, City Council adopted the Tenant Relocation Assistance Ordinance (TRAO; Ordinance No. 20-15). The TRAO created requirements for permanent and temporary relocation assistance that apply to almost all units in Hayward. Since adoption, there have been 29 relocation cases and 22 (76%) of them have been due to a Code Enforcement Notice of Violation. Administering this ordinance requires substantial communicati on with landlords and tenants, as well as collaboration and coordination with Code Enforcement, the Fire Department, and the City Attorney’s Office. Staff have also had to draft and revise Regulations for the Ordinance (per Section 12-2.14) and manage the Emergency Relocation Assistance Fund, funded through the American Rescue Plan Act. The City uses these funds to provide emergency payments to qualifying tenants displaced from their homes due to a natural disaster. The funds are also availa ble for instances when landlords do not pay

1 June 18, 2019, City Council Meeting Agenda and Materials:
https://hayward.legistar.com/LegislationDetail.aspx?ID=3985848&GUID=52D1B678 -D6BB-401A-AB3C- 8990885C0CDD&Options=&Search=

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required relocation assistance within the timeline established in the TRAO and TRAO Regulations. The funds allow the City to pay the tenant directly and recover the costs from the landlord. The TRAO does not include imposition of additional administrative fees.

The Homelessness-Housing Task Force (HHTF) heard an informational report on this item on March 2, 2023 . HHTF members had varying responses to the item and requested staff bring this item to Council with additional information regarding the implementation of the RRSO, which is included in the Discussion section of this report.2

DISCUSSION

Adopted in 2019, th e RRSO stabilizes rents for Covered Rental Units and provides tenant protections for almost all rental units in Hayward. It provides rent increase relief to tenants as allowed under State law; establishes a mediation and arbitration program to enforce its requirements and reduce tenant displacement; discourages harassment and retaliatory evictions; e ncourages investment in residential rental properties; and assures landlords receive a fair return on their property and sufficient rental income to cover operational costs.

Section 12 -1.17 of the RRSO requires that the costs of administering the ordinance be reimbursed in full through the rent stabilization fee, which is charged to all rental units. The following discussion first presents an overview of the implementation activities required to enforce the RRSO and then an analysis demonstrating that the current fee, which has not been increased since 2019, is insufficient to cover the costs of implementing the RRSO.

RRSO Implementation
Since the RRSO was adopted in 2019, staff have provided detailed annual implementation progress reports to the HHTF . 3,4,5,6 These reports integrate available data to describe key indicators such as: the volume and nature of eviction notices submitted to the City; average rent increases as determined by notices submitted by landlords to the City; the volume, type, and outcomes of petitions submitted to the City; and other implementation process indicators for the RRSO and TRAO. Most recently, the September 28, 2022, report included an analysis of unlawful detainer data obtained from the Superior Court of Alameda County.

2 March 2, 2023 HHTF Meeting Agenda and Materials:
https://hayward.legistar.com/MeetingDetail.aspx?ID=1084886&GUID=36062005 -4BA8-4A03-85D8- 589D2AEC9376&Options=info|&Search=
3March 20, 2020 HHTF Meeting Agenda and Materials:
https://hayward.legistar.com/LegislationDetail.aspx?ID=4344677&GUID=B0C788EE -6B8B-4B62-9006- 2DA3C426E0B8&Options=&Search=
4 September 3, 2020 HHTF Meeting Agenda and Materials:
https://hayward.legistar.com/LegislationDetail.aspx?ID=4627611&GUID=970D2BD1 -8039-47A6-8D9A- EFDDD16911A6&Options=&Search=
5 September 2, 2021 HHTF Meeting Agenda and Materials:
https://hayward.legistar.com/LegislationDetail.aspx?ID=5121227&GUID =035EDFAD-616C-4370-AF7E- A12DD6830D27&Options=&Search=
6 September 28, 2022 HHTF Meeting Agenda and Materials:
https://hayward.legistar.com/LegislationDetail.aspx?ID=5851268&GUID=0D2F49EE -1393-4E9F-9EAC- 33F88B4AF299&Options=&Search=

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To operationalize the RRSO and assist landlords with compliance , staff, with the support of Project Sentinel, developed templates, resources, and process workflows. These materials are critical in improving awareness of and compliance with the RRSO for tenants and landlords, in addition to engaging in the day -to-day operations required to meet the standards established in the City’s Housing ordinances . These materials require regular updates as staf f receive feedback from the users or as information changes . The following list summarizes key implementation accomplishments.
 Marketing, outreach, and education accomplishments:
o Comprehensive initial outreach efforts when the RRSO was adopted, as outlined in Attachment II of the March 5, 2020, progress report to the HHTF. o Responding to an average of over 200 inquiries per month from tenants and landlords via email, phone, and in-person communication o Mailings to tenants and landlords, including post card to all tenants in 2021 regarding housing rights during the pandemic; mailing to all landlords notifying them of updates to the RRSO; and annual invoice to landlords including FAQs for the RRSO and resources for responding to the COVID -19 pandemic
o Monthly in-person, remote, or hybrid (varying depending on social distancing requirements) educational workshops targeted for tenants and landlords covering a variety of topics including RRSO overviews, the rent increase petition process, fair housing, and maintenance and habitability. o Participation in over 50 local community events in collaboration with partners including Hayward Promise Neighborhood, Kidango, Hayward Unified School District, Glad Tidings Church, La Familia, the Chamber of Commerce, and others.
o Staff and community stakeholder participation in the 18 -month Eviction Prevention Learning Lab with quarterly meetings focused on improving outreach and education to tenants and landlords.7
 RRSO implementation accomplishments
o Development of 14 resources and forms in English, Spanish, and Chinese to facilitate implementation of the RRSO and rent review petition process o Receipt, review, and tracking of over 2,400 rent increase notices and over 700 termination notices through the end of 2022
o Processing of 117 petitions from tenants for review of rent increase or other reason and 8 capital improvement pass-through petitions from landlords, with approximately 40% of all resolved petitions proceeding through to mediation or arbitration, requiring substantial engagement from staff and Project Sentinel with petitioners and respondents to advance the petitions within the timeframe established by the RRSO
 Internal infrastructure accomplishments
o Identification of Covered Rental Units and Rental Units f or license inventory and ongoing maintenance of records

7 For more information on the Eviction Prevention Learning Lab, visit https://www.nlc.org/initiative/eviction-prevention-learning-lab/

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o Collaboration with Development Services Department and Finance to implement transition to EnerGov for maintaining unit license inventory and administering annual invoicing process
o Implementation of Microsoft Bookings module to allow community members to make appointments online for in-person or phone appointments with staff, which is often used by non -profit partners like Eden I&R (211) to help link community members to City staff for support

The efforts described above are necessary for effective implementation of the RRSO. Th is ongoing work helps prevent displacement of tenants through unpredictable rent increases while ensuring landlords have the right to sufficient rental income to cover the costs of operating their business. Ongoing i mplementation activities have focused on combined outreach to tenants so they understand and can act on their rights and education for landlords to facilitate and promote compliance.

RRSO Fee Change
The rent stabilization fee has not been increased since adoption of the new RRSO in July 2019 and in recent fiscal years , administrative expenses have exceeded collected revenues . In 2019, fees were calculated based on the best available estimates for the number of Covered Rental Units and Rental Units in Hayward and the costs of administering the RRSO. Since then, City Council adopted the TRAO without an increase in fees to cover administrative costs. After three years of implementation expenses, there is additional data to better understand the staff and consultant time and resources required to implement both the RRSO and TRAO.

Staff has not recommend ed fee increases since FY 2020 due to increased economic constraints experienced by tenants and property owners during the peak of the COVID -19 pandemic. During that time, staff identified other funds that could offset RRSO and TRAO administrative costs; however, as expenses rise across all Housing Division funds and other eligible fund balances are depleted , it is no longer feasible to use other revenue funds to offset expenses incurred through administration of the RRSO and TRAO.

Staff’s analysis of the current fee and the need to increase it considers the following factors:
 Increase in staffing requireme nts: Currently, the Housing Division has 2.7 8 FTE working on the administration of the RRSO, as outlined below. Since implementation of the RRSO and the subsequent adoption of the TRAO, each of the partially funded positions spends at least 50% of their time administering these programs. o Housing Division Manager: .35 FTE
o Management Analyst: .23 FTE
o Senior Secretary: .20 FTE
o Senior Secretary: 1.0 FTE
o Community Programs Specialist: 1.0 FTE
 Increase in consultant expenses: T he City contracts with the non -profit Project Sentinel to manage the mediation and arbitration process for Covered Rental Units submitting petitions for review of rent . Project Sentinel also develops and delivers

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outreach presentations and creat es templates and resources with City staff. Project Sentinel has not increased their rates in several years and the City has seen an increase in petitions of nearly 50% from the first year of implementation to the most recent fiscal year, likely due to a number of factors including improved outreach and inflation pressures . The increase in case load comes with corresponding time requirements for Project Sentinel staff who must correspond with parties in a timely and accurate manner.
 Increase in marketing a nd outreach expenses : Through participation in the Eviction Prevention Learning Lab, staff identified several outreach and marketing activities that can improve communication and education with tenants and landlords, with specific focus on reaching those who are the hardest to reach. Investing in these resources can improve accessibility and increase awareness of the RRSO and TRAO for tenants and landlords with the goal of preventing unnecessary evictions and displacement.

Based on current budget project ions and analysis, staff recommends increasing the annual fee to account for the anticipated increases in expenses, which will meet the obligation under Section 12-1.17 to reimburse the full cost of administration of the ordinance through the annual fee. Staff does not recommend making any changes to the fee for administering the Mobile Home Space Rent Stabilization Ordinance (MRSO) because the level of service is relatively unchanged. Specifically, the proposed fee increase for the RRSO is based on the following assumptions:

 Staffing changes : Adjust the FTE allocations to accurately reflect staff time spent administering the RRSO and TRAO.
o Housing Division Manager: .50 FTE (increase of .15 FTE) o Management Analyst: 1.0 FTE (increase of .77 FTE)
o Senior Secretary: .50 FTE (increase of .30 FTE)
o Senior Secretary: 1.0 FTE (no change)
o Community Programs Specialist: 1.0 FTE (no change)
 Consultant contract change: Negotiate new rates with Project Sentinel to adjust for inflation and account for an increased volume of petitions.  Marketing and outreach changes: Increase the supplies and services budget for marketing expenses to improve accessibility and increase awareness of the RRSO and TRAO.

Table 2 summarizes projected expenses for FY 2024 based on the above assumptions . In addition to the above increases, the summary below also reflects anticipated costs for key services including translation and interpretation and printing, mailing, and postage. Based on feedback from the HHTF, staff evaluated the projected budget to identify opportunities to reduce expenses. Staff do not recommend making any reductions to the proposed budget as any cuts in funding would correlate with cuts in service, which would prevent the City from implementing the RRSO as required by the ordinance.

Table 2. Summary of Projected FY 24 Budget

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Budget Category Projected Amount
Salaries and Benefits $748,436
Supplies & Overhead $42,387
Services $244,000
Total $1,034,823

Additionally, a s with calculations made for the fee in 2019, the proposed fee increase proportionally distributes expenses that cannot explicitly be attributed to administration of the Rent Review Program based on the most recent proportion of Covered Rental Units and Rental Units. Expenses directly related to administering the Rent Review Program for Covered Rental Units are distributed 95% to Covered Rental Units and 5% to Rental Units .

Finally, the proposed rate increase s account for the rate of unpaid fees from previous fiscal years.

The proposed fee increases in Table 3 were calculated based on the above assumptions in order to achieve full cost recovery:

Table 3. Proposed Fee Changes
Proposed Fee Increase

MH RU CRU
FEE PER UNIT $5 $32 $66
INCREASE FROM FY 19 FEE $0 $13 $26
PERCENT TOTAL INCREASE 0% 68% 65%

TOTAL PROJECTED

REVENUE
$1,034,823
Legend: MH = Mobile Home Unit; RU = Rental Unit; CRU = Covered Rental Unit

When the fee was adopted in FY 2020, staff conducted benchmarking research using FY 2019 data to compare the administrative fees of comparable jurisdictions with similar programs.

Staff revisited this research as part of the fee increase analysis and, on average, fees in comparable jurisdictions increased about 30%. Attachment II I has more detailed information on benchmarking research. The proposed fee is less than the fee required in most other jurisdictions.

Environmental Review
Section 15273 of the California Environmental Quality Act (CEQA) Guidelines states that CEQA does not apply to the establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, and other charges by public agencies which the public agency finds are for the purposes of:

1. Meeting operating expenses, including employee wage rates and fringe benefits;

2. Purchasing or leasing supplies, equipment, or materials;

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3. Meeting financial reserve needs and requirements;

4. Obtaining funds necessary for capital projects necessary to maintain service within existing services areas; or

5. Obtaining funds necessary to maintain intra-city transfers as are authorized by city Charter; and

This action is exempt from CEQA based on the foregoing provisions.

ECONOMIC IMPACT

There will be an economic impact to landlords and tenants with this fee increase , as the annual fee for both Covered Rental Units and Rental Units will increase . Tenants will likely experience some impact, as under the RRSO , owners of Covered Rental Units may pass through half the cost of the annual fee to tenants. Owners of Rental Units are not restricted by the City’s RRSO on increases that may cover the cost of the fee, though they may be subject to a State rent increase threshold.

FISCAL IMPACT

Revenue generated by the current fee implemented in FY 2020 is not sufficient to cover existing expenses incurred in administering the RRSO and TRAO. Staff anticipates that revenue generated by the proposed fee change included in this staff report will offset the costs of administering the program. There is no anticipated impact to the General Fund.

STRATEGIC ROADMAP

This agenda item supports the Strategic Priority of Present, Protect, & Produce Housing.

Specifically, this item relates to the implementation of the following projects:

Project 7, Parts 7b: Monitor the implementation of the Rent Stabilization Ordinance and prepare a statistical report

PUBLIC CONTACT

Staff presented this item for input at the HHTF meeting on March 3, 2023. Three public comments were received from landlords and property owners, expressing concern about the fee increase and asking for additional information regarding the implementation of the RRSO. Additionally, the City engaged in substantial public contact when revising the RRSO in 2019 and has received comment from HHTF members on the annual RRSO implementation progress reports described in the Discussion section of this report.8

8June 18, 2019, City Council Meeting Agenda and Materials:
https://hayward.legistar.com/LegislationDetail.aspx?ID=3985848&GUID=52D1B678 -D6BB-401A-AB3C- 8990885C0CDD&Options=&Search=

Page 10 of 10 ends

NEXT STEPS

Adoption of this Resolution will amend the Master Fee Schedule, which staff will process with the Finance Department. Staff will provide mailed notification to all property owners of the fee increase once finalized and with sufficient notice before the FY 2024 invoices are mailed in the fall . The HHTF will hear the annual implementation progress report on the RRSO in September 2023.

Prepared by: Amy Cole-Bloom, Management Analyst

Recommended by: Dustin Claussen, Assistant City Manager Christina Morales, Housing Division Manager

Approved by:

_________________________________
Kelly McAdoo, City Manager

ATTACHMENT II

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HAYWARD CITY COUNCIL

RESOLUTION NO. 23-______

Introduced by Council Member ______________

RESOLUTION AUTHOR IZING THE AMENDMENT TO RESOLUTION 23-066, THE RESOLUTION FOR THE CITY OF HAYWARD FISCAL YEAR 2024 MASTER FEE SCHEDULE ASSOCIATED WITH THE ADMINISTRATION OF CHAPTER 12, ARTICLE 1, OF THE HAYWARD MUNICIPAL CODE REGARDING THE NEW

RESIDENTIAL RENT STABILIZATION AND TENANT PROTECTION

ORDINANCE AND THE MOBILEHOME SPACE RENT STABILIZA TION

ORDINANCE AND FINDING THAT THE ACTION IS EXEMPT FROM CEQA REVIEW.

WHEREAS, Section 15273 of the California Environmental Quality Act (CEQA) Guidelines states that CEQA does not apply to the establishment, modification, structuring, restructuring, or approval of rates, tolls, fares, and other charges by public agencies which the public agency finds are for the purposes of:

1. Meeting operating expenses, including employee wage rates and fringe benefits;

2. Purchasing or leasing supplies, equipment, or materials;

3. Meeting financial reserve needs and requirements;

4. Obtaining funds necessary for capital projects necessary to maintain service within existing services areas; or

5. Obtaining funds necessary to maintain intra-city transfers as are authorized by city Charter; and

WHEREAS, The City Council finds and determines that this action is exempt from CEQA based on the foregoing provisions; and

WHEREAS, In November 2010, California voters approved Proposition 26, which amended Article XIII C of the State cons titution regarding the adoption of fees and taxes.

Proposition 26 seeks to assure that taxes, which much be approved by the voters, are not disguised as fees, which can be approved by legislative bodies, such as a city council. The proposed amendment to the Master Fee Schedule (MFS) is compliant.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Hayward hereby adopts certain changes in the Master Fee Schedule relating to fees for administration of the Residential Rent Stabilization and Tenant Protection Ordinance , as reflected in Exhibit A.

BE IT FURTHER RESOLVED, that the City Council finds that this action is exempt from CEQA review for the reasons stated herein.

ATTACHMENT II

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IN COUNCIL, HAYWARD, CALIFORNIA _______________________, 2023

ADOPTED BY THE FOLLOWING VOTE:

AYES: COUNCIL MEMBERS:

MAYOR:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ATTEST: _______________________________________
City Clerk of the City of Hayward

APPROVED AS TO FORM:

___________________________________________
City Attorney of the City of Hayward

ATTACHMENT II

Page 3 of 3 ends

Exhibit A

RENT STABILIZATION ADMINISTRATION

1 Annual Fee per Rental Unit $ 32.00

2 Annual Fee per Covered Rental Unit $ 66.00

2 Annual Fee per Mobilehome Space $ 5.00

The fees set forth herein shall be payable immediately and shall be delinquent if not received by the Housing Division on or before 5 p.m., August 31, 2023.

ATTACHMENT III

Rent Stabilization Fee Benchmarking Research

When Council adopted the rent review fee in 2019, staff provided benchmarking research comparing the fees assessed by other cities with similar ordinances. The original research used fees from FY 18-19. Below is a table updating that research, demonstrating that, on average, fees increased about 30%.

City FY 18-19 Fee FY 22-23 Fee Increase Updates &
Applicability
Richmond $207 for Fully Covered
Rental Units
$226 for Fully Covered
Rental Units
9% Tiered fee based on
type of unit
$100 for Partially
Covered Rental Units
(e.g., single-family
homes, condominiums,
and new construction)
$127 for Partially
Covered Rental Units
27%
$50 for
Governmentally
Subsidized Rental Units
$127 for
Governmentally
Subsidized Rental Units
154%
Berkeley $250 per unit $250 per Fully Covered
Unit
0% New fees were added
in 2020, creating fees
for units partially
covered by the Rent
Ordinance and
affordable units
managed by a non-
profit
150 per Partially
Covered Unit
New
$37 per affordable
units
New
Oakland $68 per unit $101 per unit 49% All units subject to the City’s Rent Adjustment
Program
Fremont $24 per unit $12 per unit -50% Residential landlords who have five or more
residential rental units

CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: PH 23-016
DATE: March 28, 2023
TO: Mayor and City Council
FROM: Assistant City Manager

SUBJECT
Hayward Municipal Code: Introduce an Ordinance Amending Chapter 10, Article 17 of the Hayward Municipal Code Updating the Affordable Housing Ordinance; and Adopt Resolutions Amending Resolution No 17-167 to Increase the Affordable Housing In-lieu Fees for Lower Density Ownership Housing and Amending the FY 2024 Master Fee Schedule and Finding the Action is Exempt from CEQA Review

RECOMMENDATION
That the City Council:
1) Holds a public hearing to obtain input on proposed amendments to the Affordable Housing Ordinance and the adoption of Affordable Housing In-Lieu Fees; and 2) Adopts a resolution (Attachment II) finding that enactment of amendments to Chapter 10, Article 17, of the Hayward Municipal Code regarding affordable housing requirements for new housing developments is exempt from the California Environmental Quality Act (CEQA); and 3) Introduces an ordinance (Attachment III) amending Chapter 10, Article 17 of the Hayward Municipal Code updating the Affordable Housing Ordinance; and 4) Adopts a resolution (Attachment IV) amending Resolution No. 17-167 to increase the affordable housing in-lieu fees for lower density ownership housing; and 5) Adopts a resolution (Attachment V) amending Resolution No. 23-066 FY 2024 Master Fee schedule approved on March 21. 2023.

SUMMARY
In early 2020, with the intention of increasing the supply of affordable housing, Council directed staff to evaluate the existing Affordable Housing Ordinance (AHO) as part of the adoption of the “Preserve, Protect, Produce Housing for All” Priority in the Strategic Road Map and the Incentives to Housing Production work plan. To evaluate the AHO, the City contracted with Strategic Economics, Inc to conduct a feasibility study and seek feedback from the Homelessness Housing Task Force (HHTF), the Planning Commission, and stakeholders. On February 21, 2023, Council held a work session to provide feedback on recommendations that resulted from the feasibility study and proposed administrative amendments.

CITY OF HAYWARD Printed on 3/24/2023Page 1 of 2
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File #:PH 23-016
The majority of the Council supported the recommendations listed below in addition to supporting the proposed administrative amendments.

On-site affordable housing recommendations:
• For-sale single-family homes and townhomes.
o Increase inclusionary requirement to 12% of the total units setting affordability levels for half of the units at low-income and the other half at moderate income (deepening the affordability targets)
o Maintain current 7.5% of units for high density condominiums. • Rental. Maintain existing affordable housing requirements for rental property due to infeasibility of developing most rental housing product types.

Affordable housing in-lieu fee recommendations:
• Rental. Maintain existing fee ($21.64 per square foot) • Ownership.
o Maintain existing fee ($17.85) for high density condominiums (35 dwelling units per acre or greater)
o Increase fee for lower density ownership projects from $21.64 to $26 per square foot. • Existing Fees will increase 8.4% in the Fiscal Year 2024 Master Fee Schedule consistent Resolution No. 17-167 based on the percentage change in the Engineering News Record Construction Cost Index applicable to the San Francisco Area.

The purpose of this report is to consider adoption of the proposed amendments to the AHO including the addition of a new finding stating Council’s preference for on-site affordable housing to create mixed income communities, and a proposed increase to the affordable housing in-lieu fee.

ATTACHMENTS
Attachment I Staff Report
Attachment II Resolution CEQA Exemption
Attachment III Proposed Affordable Housing Ordinance
Attachment IV Resolution Modifying In-lieu Fees
Attachment V Resolution Amending FY 24 Master Fee Schedule Attachment VI Feasibility Study
CITY OF HAYWARD Printed on 3/24/2023Page 2 of 2
powered by Legistar™

DATE: March 28, 2023

TO: Mayor and City Council

FROM: Assistant City Manager

SUBJECT: Hayward Municipal Code: Introduce an Ordinance Amending Chapter 10, Article 17 of the Hayward Municipal Code Updating the Affordable Housing Ordinance; and Adopt Resolutions Amending Resolution No 17-167 to Increase the Affordable Housing In-lieu Fees for Lower Density Ownership Housing and Amending the FY 2024 Master Fee Schedule and Finding the Action is Exempt from CEQA Review

RECOMMENDATION

That the City Council:

1) Holds a public hearing to obtain input on proposed amendments to the Affordable Housing Ordinance and the adoption of Affordable Housing In-Lieu Fees; and 2) Adopts a resolution (Attachment II) finding that enactment of amendments to Chapter 10, Article 17, of the Hayward Municipal Code regarding affordable housing requirements for new housing developments is exempt from the California Environmental Quality Act (CEQA); and
3) Introduces an ordinance (Attachment III) amending Chapter 10, Article 17 of the Hayward Municipal Code updating the Affordable Housing Ordinance; and 4) Adopts a resolution (Attachment IV) amending Resolution No. 17-167 to increase the affordable housing in-lieu fees for lower density ownership housing; and 5) Adopts a resolution (Attachment V) amending Resolution No. 23-066 FY 2024 Master Fee schedule approved on March 21. 2023.

SUMMARY

In early 2020, with the intention of increasing the supply of affordable housing, Council directed staff to evaluate the existing Affordable Housing Ordinance (AHO) as part of the adoption of the “Preserve, Protect, Produce Housing for All” Priority in the Strategic Road Map and the Incentives to Housing Production work plan. To evaluate the AHO, the City contracted with Strategic Economics, Inc to conduct a feasibility study and seek feedback from the Homelessness Housing Task Force (HHTF), the Planning Commission, and

Page 2 of 14 ends

stakeholders. On February 21, 20231, Council held a work session to provide feedback on recommendations that resulted from the feasibility study and proposed administrative amendments. The majority of the Council supported the recommendations listed below in addition to supporting the proposed administrative amendments.

Affordable housing in-lieu fee recommendations:
• Rental. Maintain existing fee ($21.64 per square foot) • Ownership.
o Maintain existing fee ($17.85) for high density condominiums (35 dwelling units per acre or greater)
o Increase fee for lower density ownership projects from $21.64 to $26 per square foot.
• Existing Fees will increase 8.4% in the Fiscal Year 2024 Master Fee Schedule consistent Resolution No. 17-167 based on the percentage change in the Engineering News Record Construction Cost Index applicable to the San Francisco Area.

BACKGROUND

The AHO was adopted in 2003 to address the need for affordable housing that is created by the development of market rate housing. On November 28, 2017, the Council adopted amendments to the AHO based on feedback from a variety of stakeholders, including the following major revisions:

 Extending applicability of the AHO from projects consisting of 20 units or more to projects that consist of 2 units or more;

1 February 21, 2023 Staff Report and Attachments: CITY OF HAYWARD - File #: WS 23-004 (legistar.com)

Page 3 of 14 ends

 Increasing the affordable housing in-lieu fee from $3-$5 per habitable square foot to $15-$18, depending on project density, to encourage on-site inclusion of affordable housing;
 Increasing the on-site affordable housing requirement for ownership housing from

7.5% to 10% of the units targeting moderate income while retaining the lower requirement 7.5% of units for high density ownership projects due to concern over feasibility;
 Reducing the on-site rental housing requirement option from 7.5% to 6% of the units in order to require units for both low-and very-low-income households;  Allowing a reduced fee for projects less than nine units in order not to disincentivize the development of small-scale infill projects; and
 Allowing the developer to choose their method of compliance, including the following options:
 on-site affordable units
 off-site affordable units
 paying an affordable housing in-lieu fee
 proposing alternate plans.

In March 20222,3, the Homelessness Housing Task Force (HHTF) and the Planning Commission reviewed the outcomes and performance of the existing AHO and provided direction to staff regarding the goals and target populations to be served by any future revisions to the AHO. In consideration of the feedback established by the HHTF and the Planning Commission and in order to ensure economic feasibility of any proposed changes to the City’s AHO, the City contracted with Strategic Economics Inc (the Consultant) to conduct a feasibility study (Attachment VI). On September 28, 2022 and December 8, 2022, Strategic Economics presented preliminary findings to the HHTF and the Planning Commission respectively to discuss preliminary findings of the feasibility study and receive feedback. On February 21, 2023, Council held a work session to provide feedback on recommendations that resulted from the feasibility study and proposed administrative amendments. The recommendations included the following:

2 March 3, 2022 HHTF Staff Report and Attachments: CITY OF HAYWARD - File #: RPT 22-023 (legistar.com) 3 March 10, 2022 HHTF Staff Report and Attachments: CITY OF HAYWARD - File #: WS 22-006 (legistar.com)

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Affordable housing in-lieu fee recommendations:
• Rental. Maintain existing fee ($21.64 per square foot) • Ownership.
o Maintain existing fee ($17.85) for high density condominiums (35 dwelling units per acre or greater)
o Increase fee for lower density ownership projects from $21.64 to $26 per square foot.
• Existing Fees will increase 8.4% in the Fiscal Year 2024 Master Fee Schedule consistent Resolution No. 17-167 based on the percentage change in the Engineering New Record Construction Cost Index applicable to the San Francisco Area.

Majority of the Council supported the proposed modification with some interest in the following:
 Increase the requirements for on-site inclusionary homeownership units to 15%  Increase the rental requirements or set parameters to increase rental requirements once market improves
 Provide information about how the affordable housing in-lieu fees have been used  Provide information on factors that may contribute to Fremont creating more inclusionary units.
 Incorporate commercial development timeline in the affordable housing phasing plan
 Add language to indicate that on-site inclusionary housing is the City’s preference  Include information about other strategies used by the City to improve housing stability and affordability

State Law and Inclusionary Housing
Effective January 1, 2018, AB 1505 reaffirmed the authority of local governments to include rental units within inclusionary ordinance requirements, as well as added a limited California Department of Housing and Community Development (HCD) review of inclusionary ordinances, under certain circumstances. One of the key provisions includes requiring local jurisdictions to conduct economic feasibility studies to demonstrate that an inclusionary ordinance does not unduly constrain the production of housing. Due to potential scrutiny by HCD and the City’s intention to increase the supply of affordable housing, staff recommends that any increase to the City’s affordable housing requirements adhere to the findings in the feasibility study to minimize the potential that the any modifications to the AHO requirements will unduly constrain or halt the production of housing.

Hayward Housing Need
The City’s displacement study, prepared by HR&A Advisors, draws a picture of low-income households, particularly renters and Black and Hispanic households, who are experiencing intense economic pressure and housing need in Hayward. Study findings demonstrate that those pressures have intensified in the last decade and have already resulted in a loss of low- income Hayward residents. Those who are still living in Hayward are struggling with cost burden, especially Black and Hispanic households, as housing supply does not align with

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household income. Figure 1 below illustrates the housing supply gap and a need to develop housing with rents below $1,250 per month which equates to very-low-income housing.

Figure 1. Hayward Housing Supply Gap (2019)
Housing Element and Regional Housing Needs Allocation Compliance

Local jurisdictions report progress annually on meeting their Regional Housing Needs Allocation (RHNA) goals. Table 1 demonstrates progress made toward meeting Hayward’s RHNA goals for the period between 2015-2023 as of the last report year (2021) and estimates potential compliance by including approved projects and projects pending approval. Permits to construct the units must be issued in order to count toward the City’s RHNA goals. The City already exceeded its goal for above moderate income units.

Table 1. 2023 RHNA Goal Progress in the City of Hayward Income
Category
Unit
Goal
Reported
2021 Approved Pending
Approval
Estimated
Compliance
Estimated
Deficiency
Units % of
Goal Units % of
Goal Units % of
Goal Units % of
Goal Units % of
Goal
Very low 851 168 20% 345 41% 20 2% 533 63% 318 37%
Low 480 174 36% 197 41% 0 0% 371 77% 109 23%
Moderate 608 128 21% 66 11% 0 0% 194 32% 414 68%
*The City has achieved the Above Market Rate housing goals for the 2015-2023 RHNA cycle.

The AHO is one important tool to help the City to comply with its RHNA goals by providing on- site inclusionary units (mostly targeting moderate income households) and by providing fee revenue that the City can use to subsidize the development of affordable housing (targeting low, very low and extremely low income households). To maximize the number of affordable units produced under the AHO and to ensure that and increase to the requirements under the AHO do not unduly constrain development, the City contracted with Strategic Economics to conduct a feasibility study.

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DISCUSSION

Staff, with the support of Strategic Economics, evaluated the feedback from the Council Work Session. Further analysis continues to support the recommendations made during the work session. However, language was added to the findings of the AHO to state the preference for providing on-site affordable units when feasible to create mixed-income communities. The purpose of this discussion is to address some of the outstanding questions and to provide requested information.

Challenges for Increasing Inclusionary Rental Housing Requirements While the feasibility study illustrates that development of high-density rental housing is infeasible with or without the affordable housing requirements, there was still a minority of Councilmembers interested in either increasing the inclusionary requirement for rental housing or including language that would increase the requirements when market conditions change. Staff does not recommend increasing the inclusionary housing requirements for rental units for the following reasons:

 Strategic Economics’ analysis found that the rental housing prototypes were financially infeasible under nearly all circumstances . The prototypes can support minimal or negative land value in most circumstances, as shown in Figure 2. The only exception was the “Small Multifamily” prototype, which was potentially feasible in the “Tier 1” strongest market locations in Hayward.

Figure 2: Residual Land Value Results Under Existing AHO On-Site Inclusionary Requirements for Rental Products, by Market Tier

Source: Strategic Economics, 2023.

Figure 1 is a reproduction of Figure 26 in Strategic Economics’ report, but excludes the ownership housing products.

 Current residential rents would need to increase significantly for most rental product types to become feasible even under the existing requirements. Figure 3 shows the net operating income increase needed to support re ntal housing development under current market conditions. The actual corresponding increase in rents for the market rate housing units would be even higher than the net operating income increase since the affordable housing units’ rents are restricted.
$75 $45 $25
$86
$22
-$10
$35
-$39 -$76-$63
-$162
-$212-$177
-$272
-$320-$350
-$250
-$150
-$50
$50
$150
Tier 1 Tier 2 Tier 3
Value per Square Foot of
Land
Land Price Small Multifamily Stacked Flats 5-Story Wrap 5-Story Podium (TOD)

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Figure 3: Percent Change in Net Operating Income Required to Match Feasibility Threshold Under Current AHO Requirements, by Product Type and Market Tier

Source: Strategic Economics, 2023.

 Increasing the inclusionary requirements for already largely infeasible rental housing development would add a further constraint to achieving the City’s housing production goals. The increased inclusionary requirements would increase the financial barriers to developers choosing to pursue rental housing development projects —especially higher-density rental projects that are prioritized by City policy in locations such as near BART stations.

 While the existing AHO also creates a financial constraint on production, maintaining the existing requirements represents a moderate approach. The existing rental inclusionary requirements ensures affordable units or in -lieu fee revenue would be delivered when or if rental housing becomes feasible, while also not wors ening the financial constraint to housing production that would be created by increased requirements.

Staff also considered if there was an index that could be used to determine when to raise the inclusionary requirements for rental housing. However, there are so many factors (rents, cost of materials, labor costs, financing costs, changing development standards, etc.) that contribute to project feasibility that it is difficult to predict what combination of changes would be required to address the feasibility issues. As illustrated in Figure 3, a substantial increase to net operating income is currently necessary to achieve financial feasibility even if construction costs do not increase. Staff does not recommend increasing the inclusionary rental requirements without a future feasibility study.

Infeasible to Increase Homeownership Unit Requirements to 15% While Including Low-Income Units

Strategic Economics, Inc evaluated the possibility of increasing the on-site inclusionary requirement for for-sale units to 15% and determined:
 Increasing ownership inclusionary requirements beyond the recommended 12% would make many ownership housing projects no longer fina ncially feasible if construction costs increase even slightly. Error! Reference source not found. demonstrates that with a -2%
6% 9%7%
17% 23%18%
31%
38%35%
51%
60%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
Tier 1 Tier 2 Tier 3
Percent Change in NOI to
Match Feasibilty Threshold
Small Multifamily Stacked Flats 5-Story Wrap 5-Story Podium (TOD)

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12% inclusionary requirement (split evenly between low and moderate-income units), the single family and townhome prototypes can maintain feasibility while sustaining hard cost increases of up to four percent. In comparison , Error! Reference source not found. demonstrates that these prototypes cease to achieve feasibility with cost increases as low as two percent if a 15% inclusionary requirement is used instead.

Figure 4: Sensitivity Analysis Results for Ownership Units - Assuming 12 Percent Required Inclusionary and 50/50 Split Between Low and Moderate Income Current Costs Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Increase in Hard Costs of
Construction 0% 1% 2% 3% 4% 5%
Feasibility by Project Type
Single Family
Development Feasible Feasible Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Townhomes
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible Infeasible
Source: Strategic Economics, 2023.

Notes:

Projects considered "Feasible" if Return on Cost is greater than 25% Projects considered "Marginally Feasible" if Return on Cost is greater than 20% Projects considered "Infeasible" if Return on Cost is less than 20%

Figure 5: Sensitivity Analysis Results for Ownership Units - Assuming 15 Percent Required Inclusionary and 50/50 Split Between Low and Moderate Income Current Costs Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Increase in Hard Costs of
Construction 0% 1% 2% 3% 4% 5%
Feasibility by Project Type
Single Family
Development
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Townhomes
Marginally
Feasible
Marginally
Feasible Infeasible Infeasible Infeasible Infeasible
Source: Strategic Economics, 2023.

Notes:

 The recommended policy shift from a 10% moderate-income inclusionary requirement to a 12 % inclusionary requirement split between low - and moderate-income units represents a substantial increase in requirements from a financial feasibility perspective. The single-family prototype can feasibly dedicate approximately 3% fewer units as inclusionary housing when split between low - and moderate-income units compared to providing moderate -income units only. Meanwhile, townhomes can feasibly dedicate approximately 7% fewer units as inclusionary housing with the switch from moderate-only units to a 50/50 split between low and moderate-income units.

Staff recommends increasing the inclusionary requirement from 10% to 12% and deepening affordability level for half of the units to provide ownership opportunities for low -income households to ensure that the ordinance can sustain greater changes to market conditions

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while maintaining feasibility. Targeting both low and moderate income households will create ownership opportunities for more community members.

Use of Affordable Housing In-lieu Fee
$9.6 million in-lieu fees (Inclusionary Housing Trust Funds) have funded five affordable housing developments providing a total of 364 units of affordable housing targeting extremely low (ELI), Very Low (VLI), and Low Income (LI) households. Details of the unit mix and the City funding commitments are included in Table 2. In addition to the inclusionary housing trust funds, the City has committed nearly $35 million in funds and land donations to subsidize the development of affordable housing. Most of the non- Inclusionary Trust fund monies are one-time funds and do not represent an ongoing or dedicated source of funds to subsidize affordable housing. Additionally, the City was able to leverage Inclusionary Housing Trust funds to receive nearly $4 million in Local Housing Trust Funds from HCD which have been allocated to Mission Paradise and Parcel Group 8 Affordable Housing. The City’s Inclusionary Housing Trust Funds are crucial to help grow the City’s affordable housing portfolio and to leverage state funds.

Table 2. City Inclusionary Housing Trust Fund Commitments by Project Project Project
Type ELI* VLI LI Total
units**
Inclusionary
Housing
Trust
Other City
Funds
Depot
Community
Apartments
Individuals 67 27 30 125 $1,610,000 $22,839,865
Mission
Paradise Senior 36 26 13 76 $3,764,720 $2,365,280
Pimentel
Place Family 35 11 10 57 $2,000,000 $238,951
Sequoia
Grove Ownership 0 0 10 10 $200,000 $600,000
Parcel
Group 8
Affordable
Housing
Family 0 42 53 96 $2,000,000 $8,865,161
Total 138 106 116 364 $9,604,720 $34,909,257
*Permanent supportive units
**Includes manager unit where applicable

Factors that May Contribute to Fremont Creating More Inclusionary Units Rental rate differences between Hayward and Fremont partly explain increased development activity in Fremont. Fremont commands significantly higher residential rental rates compared to Hayward. As an example, the average effective rent per square foot in the Hayward/Castro Valley/Union City market area is approximately 15 percent lower than the effective rent per square foot in the Fremont/Newark market area—as shown in Figure 6. This gap in achievable rents partially explains the greater development activity and interest in Fremont.

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Figure 6: Average Rent for All Rental Housing Units in Fremont/Newark vs.

Hayward/Castro Valley/Union City, 2022

Asking Rent Effective Rent
Per Unit
Per
Sq Ft
Annual
Growth Rate
Tenant
Concessions Per Unit
Per Sq
Ft
Annual Growth
Rate
Fremont/Newark $2,646 $3.18 10.30% 1.10% $2,616 $3.15 11.60% Hayward/Castro
Valley/Union City $2,174 $2.69 5.40% 0.30% $2,166 $2.68 6.60% Source: CoStar, 2022.

In addition to higher average rents, higher median household income in Fremont demonstrates a capacity to pay higher rents and purchase prices necessary to cross subsidize the inclusionary units. Table 3 compares the median income by tenure in Hayward and Fremont.

Table 3. Median Income comparison Hayward/Fremont by Tenure Hayward Fremont
Renter Occupied $73,604 $121,769
Owner Occupied $120,058 $181,558
Total $96,386 $155,968
Source: American Community Survey 2021

Adding Commercial Development to Affordable Unit Phasing Plan Staff recommended changing language regarding the affordable unit phasing plan because it was unclear to developers that the phasing plan needed was only in relation to the timing of the affordable units. Adding reference to commercial development timing may only further cause confusion regarding the intent of the affordable unit phasing plan. However, the City’s standard conditions of approval do specify timing of delivery of commercial space in relation to the residential units in mixed-use development. The standard conditions of approval include requirements for the timing of the commercial component of a development in relation to the residential component.

State City Preference for On-site Inclusionary Housing
Language was added to the findings of the AHO to state the preference for providing the on-site affordable units when feasible to create mixed-income communities. This language does not require on-site affordable units but does provide guidance to the developers regarding the Council’s preference.

Include Information about other Strategies used by the City to Improve Housing Stability and Affordability.

The AHO is one tool that creates two strategies for creating affordable housing (on-site inclusionary units and revenue to subsidize the development of affordable housing).

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However, the City has implemented and is working on other strategies to improve housing affordability and stability including:
 Residential Rent Stabilization and Tenant Protection Ordinance4  Tenant Relocation Assistance Ordinance5 and implementation of the Emergency Relocation Assistance Fund6
 Opening a Hayward Navigation Center
 Incentives to Housing Production Work Plan7
 Let’s House Hayward! Strategic Plan8
 Funding contracts with services providers to provide legal service for low-income tenants, tenant/landlord mediation, fair housing testing, housing counseling, rental assistance (no longer active), shallow rental subsidy, foreclosure prevention services providers, fair housing organization, housing counselors, and foreclosure prevention  Applying for State housing and planning grants

California Environmental Quality Act (CEQA)
The amendments to the AHO and the resolution adopting In-Lieu Fees are exempt from CEQA because they will not have any significant effect on the environment. They only affect the affordability of residences constructed in the City and contain no provisions affecting the physical design or development of residences, and so it can be seen with certainty that there is no possibility that the resolutions may have a significant effect on the environment. (CEQA Guidelines Section 15061(b)(3)). Future projects would go through project specific CEQA review at the time they are proposed.

Recommendation

Staff recommends:
 Modifying the AHO to increase ownership inclusionary requirement for lower-density housing products to 6% low-income and 6% moderate-income and to improve implementation by clarifying language, better aligning some of the requirements with the development process to streamline, and to conform requirements with existing affordable housing agreements and resale restrictions; and  Adopting a resolution to increase the affordable housing in-lieu fee for lower density ownership projects from $21.64 to $26 per square foot.

To ensure that the AHO produces units that meets the diverse housing needs of Hayward community members, the AHO must both produce:

1. Inclusionary units providing ownership opportunities for moderate and low income households (as proposed); and

2. Generate fee revenue to subsidize the development of affordable housing for low, very low and extremely low-income households.

4 June 25, 2019 Staff Report and Attachments: CITY OF HAYWARD - File #: CONS 19-474 (legistar.com) 5 July 14, 2020 Staff Report and Attachment: CITY OF HAYWARD - File #: LB 20-035 (legistar.com) 6 June 3, 2021 Staff Report and Attachments: CITY OF HAYWARD - File #: WS 21-029 (legistar.com) 7 March 2, 2020 Staff Report and Attachments: CITY OF HAYWARD - File #: CONS 20-120 (legistar.com) 8 July 13, 2021 Staff Report and Attachments: CITY OF HAYWARD - File #: LB 21-032 (legistar.com)

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ECONOMIC IMPACT

Social research indicates that access to affordable housing can improve education outcomes, increase health and wellbeing, boost economic activity, and lower the costs for state and local governments to provide emergency housing, mental health crisis services, emergency medical care, and other services to assist the homeless or families and individuals with a housing crisis. The rent for affordable housing is relative to income levels versus market prices which reduces rent burden. This increases available income to pay for other basic needs or save for other financial goals such as furthering education or homeownership. Stabilizing housing costs can be the first step to creating opportunities for personal economic advancement.

FISCAL IMPACT

There is no fiscal impact to the General Fund associated with this item.

STRATEGIC ROADMAP

This agenda item supports the Strategic Priority of Preserve, Protect, & Produce Housing.

Specifically, this item relates to the implementation of the following project:

Project 5, Part 5.b: Evaluate the Affordable Housing Ordinance and hold a work session to discuss potential revisions.

PUBLIC CONTACT

Staff engaged different community stakeholders through both the displacement study and the Let’s House Hayward! Strategic Plan process. Through the displacement study, HR&A Advisors interviewed local developers and service providers to gain a more qualitative understanding of displacement trends and housing needs. Through the Let’s House Hayward! Planning process, staff and the consultant Homebase held virtual forums and interviews with individuals with lived experience of homelessness, homeless services provide rs, members of the business community, City staff, and other Hayward residents. Feedback ranged widely and is still being integrated, but initial findings demonstrate that community members broadly favored efforts to prevent displacement and to increase affordable housing development for the City’s most vulnerable residents.

Outreach to Developers: The Consultant facilitated a TAC. The purpose was to provide feedback on market conditions, housing needs, development prototypes, and analysis assumptions/results. Members include market rate and affordable housing developers with recent projects in Hayward. The TAC reviewed the preliminary recommendations on November 15, 2022, and had the following comments:
 Maintain flexible AHO compliance options because feasibility related to AHO compliance is project specific;

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 Fees and on-site affordable housing requirements increase rents and prices for non- restricted units which gets passed on to the end user;
 The current requirements strike a good balance for the developer, market rate buyer and the affordable buyer;
 Some developers indicated they prefer providing on-site units when feasible but wished the city would loosen requirements regarding implementation;  There was concern that the sensitivity testing was too conservative with construction costs increasing on average between 5% and 10% and interest rates rising; and  Would like the AHO to allow affordable housing developers to use Low-income Housing Tax Credit rent and income limits.

Community Outreach: Staff gathered input from community members at two fair housing workshops and a Housing Fair. There were approximately 18 respondents who indicated the following priorities.

 Ownership housing
 Prioritize middle-income households ($171,350 annual income for 4-person household)
 Prioritize extremely low-income households ($42,850 annual income for 4-person household)
 Prioritize mixed income housing within new developments  Prioritize rental housing

While there was limited response, the responses indicated that there is a wide span of housing priorities and that proposed housing policy should meet these diverse needs. The AHO provides a number of tools to address those various housing needs and some tools have been more effective than others at creating units that serve those specific target populations.

Furthermore, staff published a legal notice of the hearing regarding the amendments to the Affordable Housing Ordinance and update to the in-lieu fees in the Daily Review on March 17, 2023 and March 24, 2023.

NEXT STEPS

If the proposed legislation is approved, the second reading will take place on May 2, 2023 and take effect thirty days after adoption. New in-lieu fees will be effective July 1, 2023 under the FY 2024 Master Fee schedule. Staff will notify developers with existing projects of the rate change.

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Prepared by: Christina Morales, Housing Division Manager

Recommended by: Dustin Clausen, Assistant City Manager

Approved by:

______________________________________________
Kelly McAdoo, City Manager

ATTACHMENT II

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HAYWARD CITY COUNCIL
RESOLUTION NO. 23-______
Introduced by Council Member _____________

RESOLUTION FINDING THAT THE ENACTMENT OF AN ORDINANCE
AMENDING CHAPTER 10, ARTICLE 17, OF THE HAYWORD MUNICIPAL CODE

REGARDING AFFORDABLE HOUSING REQUIREMENTS FOR NEW HOUSING

DEVELOPMENTS IS EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL

QUALITY ACT (CEQA)

WHEREAS, the City Council of the City of Hayward (the "City") has reviewed the provisions of proposed amendments to the Hayward Municipal Code Chapter 10, Article 17 (the "Affordable Housing Ordinance"), which imposes affordable housing requirements for new housing developments; and
WHEREAS, the City Council has reviewed the information contained in the proposed Affordable Housing Ordinance and the accompanying staff repor t and attachments thereto at a duly noticed meeting on March 28, 2023.

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF HAYWARD hereby finds that the proposed Affordable Housing Ordinance is exempt from CEQA because it can be seen with certainty that there is no possibility that the adoption of the proposed amendments to the Affordable Housing Ordinance may have a significant effect on the environment, in that the amendments to the Affordable Housing Ordinance affect only the affordability of residences constructed in the City of Hayward and contain no provisions modifying the physical design, development, or construction of residences (CEQA Guidelines Section 15061(b)(3)).

ATTACHMENT II

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IN COUNCIL, HAYWARD, CALIFORNIA _______________, 2023
ADOPTED BY THE FOLLOWING VOTE:

AYES: COUNCIL MEMBERS
MAYOR:

NOES: COUNCIL MEMBERS
ABSTAIN: COUNCIL MEMBERS
ABSENT: COUNCIL MEMBERS

ATTEST: ______________________________________
City Clerk of the City of Hayward

APPROVED AS TO FORM:

___________________________________________
City Attorney of the City of Hayward

ATTACHMENT III

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ORDINANCE NO. ___

AN ORDINANCE OF THE CITY OF HAYWARD AMENDONG CHAPTER 10, ARTICLE 17, OF THE HAYWARD MUNICIPAL CODE REGARDING

AFFORDABLE HOUSING REQUIREMENTS FOR NEW HOUSING

DEVELOPMENTS

NOW THEREFORE THE CITY COUNCIL OF THE CITY OF HAYWARD DOES ORDAIN AS FOLLOWS:

Section 1. Chapter 10, Article 17, of the Hayward Municipal Code is hereby amended to read as follows:

ARTICLE 17 - AFFORDABLE HOUSING ORDINANCE
SEC. 10-17.100 GENERAL PROVISIONS
SEC. 10-17.105 TITLE.

This title shall be known and may be cited and referred to as the "Hayward Affordable Housing Ordinance."
SEC. 10-17.110 PURPOSE.

The purpose of this Article is to:
a. Enhance the public welfare by ensuring that future Residential Development Projects contribute to the attainment of the affordable housing goals set forth in the 2015-2023 Housing Element of the General Plan of the City of Hayward. b. Require that future Residential Development Projects mitigate their impact on the need for affordable housing in Hayward by contributing to the production of residences in Hayward that are affordable to extremely low, very low, low-and moderate-income households.
c. Increase the production of residences in Hayward that are affordable to extremely low, very low, low, and moderate-income households.
d. Ensure that residences affordable to extremely low, very low, low- and moderate- income households are distributed throughout the City's various neighborhoods. e. Support the housing objectives contained in State law.

ATTACHMENT III

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SEC. 10-17.115 FINDINGS.

The City Council finds and determines that lack of access to affordable housing has a direct impact upon the health, safety and welfare of the residents of the City of Hayward.

The housing problem affects a broad range of income groups, including many who would not need public assistance or intervention in the housing market if they lived outside of the San Francisco Bay Area.
a. According to the 2015-2023 Housing Element, 48 percent of Hayward households pay more than 30 percent of their income for housing. Over 68 percent of lower income households overpay, and among very low-income households, 89 percent of renters overpay for housing.
b. The 2015-2023 Housing Element also shows that most lower income households cannot afford any available housing in Hayward and that moderate-income households can afford to rent but not purchase housing in Hayward. c. Because all forms of housing are expensive to build, rent, and buy, a variety of housing programs and resources are required to help meet the need for affordable housing.
d. The California Legislature has required each local government agency to develop a comprehensive, long-term plan establishing policies for future development. As specified in Government Code Section 65583(c), the plan must (1) encourage the development of a variety of types of housing for all income levels, including multifamily rental housing; and (2) "[a]ssist in the development of adequate housing to meet the needs of extremely low, very low, low- and moderate-income households." The City is also charged by the Legislature to use the powers vested in it to make adequate provision for the housing needs of all economic segments of the community. (Section 65580(d).)
e. Because of the high cost of both existing and newly constructed housing, the City will be limited in its ability to contribute to the attainment of State housing goals and to maintain a thriving mixed-income community without additional affordable housing.
f. Rising land prices have been a key factor in preventing development of new affordable housing. New housing construction in the City that does not include affordable units aggravates the existing shortage of affordable housing by absorbing the supply of available residential land. This reduces the supply of land for affordable housing and increases the price of remaining residential land. At the same time new housing contributes to the demand for goods and services in the City, increasing local service employment at wage levels that do not often permit employees to afford housing in the City. Providing the affordable units or fees required by this ordinance will mitigate the impacts of market-rate development on the need for affordable housing and will help to ensure that part of the City's remaining developable land is used to provide affordable housing.

ATTACHMENT III

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g. Because maintaining housing development feasibility while maximizing the production of affordable housing is a priority for the City, this ordinance provides multiple means of compliance; however, when feasible, the City encourages the development of on-site Affordable Units to create mixed-income communities.

SEC. 10-17.120 DEFINITIONS.

As used in this Article, each of the following terms is defined as follows:
a. "Affordable Unit" is defined as an ownership or rental Dwelling Unit whose price is set at an Affordable Ownership Cost or Affordable Rent as defined in this Article.
b. "Affordable Ownership Cost" is defined as the maximum purchase price that will be affordable to a Moderate Income Households, Low Income Households, Very low Income Households, Extremely Low Income Households at Presumed Occupancy Levels, based on a reasonable down payment and monthly housing payments (including, but not limited to, mortgage principal and interest, property taxes, homeowner's insurance, and homeowner/condominium association fees where applicable) that do not exceed the following, based on Presumed Occupancy Levels:

1. For Extremely Low Income Households: one-twelfth (1/12th) of thirty percent (30%) of twenty percent (20%) of Area Median Income adjusted for household size; and

2. For Very Low Income Households: one-twelfth (1/12th) of thirty percent (30%) of forty percent (40%) of Area Median Income adjusted for household size; and

3. For Low Income Households: one-twelfth (1/12th) of thirty percent (30%) of seventy percent (70%) of Area Median Income adjusted for household size; and

4. For Moderate-income Households: one-twelfth (1/12th) of thirty-five percent (35%) of one hundred ten percent (110%) of Area Median Income adjusted for household size.
c. "Affordable Rent" is defined as the maximum monthly rent, including all fees for housing services and a utility allowance as determined by the Alameda County Housing Authority, that does not exceed the following, based on Presumed Occupancy Levels:

1. For Extremely Low Income Households: thirty percent of Area Median Income multiplied by thirty percent and divided by twelve.

2. For Very Low Income Households: fifty percent of Area Median Income multiplied by thirty percent and divided by twelve.

3. For Low Income Households: sixty percent of Area Median Income multiplied by thirty percent and divided by twelve.

ATTACHMENT III

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d. "Applicant" is defined as any person, firm, partnership, association, joint venture, corporation, or any entity or combination of entities that seeks discretionary or ministerial permits for a Residential Development Project from the City of Hayward.
e. "Area Median Income (AMI)" is defined as the median income for Alameda County, adjusted for household size, as published annually in Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development (HCD). f. "Decision-Making Body" is defined as the body with the authority to approve an application for a Residential Development Project.
g. "Dwelling Unit" is defined as a dwelling designed and intended for residential occupancy by one household.
h. "Extremely Low, Very Low, Low, and Moderate-Income Households" are defined as households whose incomes do not exceed the extremely low, very low, low, or moderate-income limits, as applicable, established for Alameda County and adjusted for household size that are published annually in Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by HCD. i. "Household Income" is defined as the gross annual household income, monetary benefits, and all other sources of household income, before deductions or exemptions, and includes the income of all members of the household 18 years of age or older.
j. "Ownership Residential Project" is defined as any Residential Development Project that creates new Dwelling Units that may be sold individually, including but not limited to condominiums, townhomes, stock cooperatives, community apartments, and attached or detached single-family homes. An Ownership Residential Project also includes any Residential Development Project with a recorded condominium plan or map and the conversion of residential property to common interest developments as described in Hayward Municipal Code Section 10-3.370.
k. "Presumed Occupancy Levels" as listed below shall be used to establish Affordable Ownership Cost and Affordable Rents, unless the Residential Development Project is financed with federal tax credits, in which case the applicable federal regulations shall determine the Presumed Occupancy Levels:
(1) One person for a studio unit;
(2) Two people for a one bedroom unit;
(3) Three people for a two bedroom unit; and
(4) One additional person for each additional bedroom thereafter. l. "Rental Residential Project" is defined as any Residential Development Project that creates new Dwelling Units that cannot be sold individually.

ATTACHMENT III

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m. "Residential Development Project" is defined as any development for which a discretionary or ministerial permit is required that includes the creation of two (2) or more net new Dwelling Units or residential lots, or Dwelling Units and residential lots in combination. A conversion of residential property containing two (2) or more Dwelling Units to a common interest development, as defined in Hayward Municipal Code Section 10-3.370, is also a Residential Development Project. All development within a two-year period of two (2) or more Dwelling Units on a lot, or on contiguous lots for which there is evidence of common ownership or control, even though not covered by the same City discretionary or ministerial permit, shall be considered to be one Residential Development Project.

The provisions of this section shall be interpreted broadly to effect the purposes of this chapter and to prevent evasion of its terms.

SEC. 10-17.200 RESIDENTIAL DEVELOPMENT PROJECTS
SEC. 10-17.205 UNIT THRESHOLD AND BASIC REQUIREMENTS.

All Residential Development Projects consisting of two (2) or more Dwelling Units or lots shall be subject to the affordable housing requirements of this Article. This Article shall be applied no more than once to an approved Residential Development Project, regardless of changes in the character or ownership of the development, provided that the total number of Dwelling Units does not change.

At the time an application for a Residential Development Project is submitted, the Applicant shall specify how the requirements of this Section shall be met. An Applicant for a Residential Development Project shall comply with the affordable housing requirements of this Article by satisfying one of the following options:
a. Pay an affordable housing in-lieu fee under Section 10-17.410; or b. Include on-site for-sale Affordable Units as specified in Section 10-17.210 or on- site rental Affordable Units as specified in Section 10-17.215 as approved by the Decision-Making Body. Where the calculation of the required number of Affordable Units results in a fraction of a unit, the Applicant may provide one additional Affordable Unit or pay affordable housing in-lieu fees for the fractional unit. If a project amendment results in a change in the total number of Dwelling Units, the number of Affordable Units required will be recalculated to coincide with the final approved Residential Development Project; or c. Construct Affordable Units not physically contiguous to the development (off-site) if approved by the Decision-Making Body under Section 10-17.225; or d. Propose additional alternatives not listed in this Article if approved by the Decision-Making Body under Section 10-17.230; or
e. In an Ownership Residential Project, provide rental Affordable Units consistent with Section 10-17.215 as approved by the Decision –Making Body.

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SEC. 10-17.210 ON-SITE UNITS IN OWNERSHIP RESIDENTIAL PROJECTS.

If the Applicant elects to provide on-site for-sale Affordable Units in an Ownership Residential Project, they shall be provided as follows:
a. High-Density Condominium Projects. In high-density condominium projects approved at densities of thirty five (35) units per acre or more, 7.5 percent of the Dwelling Units shall be for-sale Affordable Units and Affordable Units shall be made affordable to Moderate-Income Households at Affordable Ownership Cost. b. All Other Ownership Residential Projects.
(1) In all other Ownership Residential Projects with submitted Affordable Housing Plans pending approval prior to the effective date of this Ordinance amendment, ten (10) percent of the Dwelling Units shall be for-sale Affordable Units and Affordable Units shall be made affordable to Moderate-Income Households at Affordable Ownership Cost. (2) In all other Ownership Residential Projects submitting an Affordable Housing Plan for approval after the effective date of this Ordinance amendment, twelve (12) percent of the Dwelling Units shall be for-sale Affordable Units and one-half of for-sale Affordable Units shall be made affordable to Moderate-Income Households and one-half shall be made affordable to Low Income Households at Affordable Ownership Cost. c. The Applicant may elect to provide Affordable Units affordable to Extremely Low, Very Low, or Low Income Households rather than units affordable to the affordability level as required within this section.
d. For-sale Affordable Units must be legally restricted to occupancy by Moderate- Income Households, Low Income Households, Very low Income Households, Extremely Low Income Households, as required or elected, at Affordable Ownership Cost in perpetuity.

SEC. 10-17.215 ON-SITE UNITS IN RENTAL RESIDENTIAL PROJECTS.

If the Applicant elects to provide on-site rental Affordable Units in a Rental Residential Project, they shall be provided as follows:
a. Six (6) percent of the Dwelling Units shall be rental Affordable Units. b. One-half of rental Affordable Units shall be made affordable to Low-Income Households at Affordable Rent and one-half shall be made affordable to Very Low Income Households at Affordable Rent. The first Affordable Unit required shall be made affordable to Very Low Income Households at Affordable Rent. The Applicant may elect to provide Affordable Units affordable to Extremely Low or Very Low Income Households rather than units affordable to Very Low and Low- Income Households.

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c. Rental Affordable Units must be legally restricted to occupancy by Low-Income, Very Low Income Households or Extremely Low Income Households, as elected, at Affordable Rent in perpetuity.

SEC. 10-17.220 DESIGN, DISTRIBUTION AND TIMING OF AFFORDABLE UNITS.

On-site Affordable Units shall be integrated with the proposed Residential Development Project, as set forth in this Chapter and as required by law including, but not limited to California Health and Safety Code Section 17929, and shall be comparable in infrastructure (including sewer, water and other utilities), construction quality, exposure to environmental conditions, access to amenities, and exterior design to the on-site market- rate units. Specifically:
a. The Affordable Units should be integrated with the project as a whole. The Affordable Units must be at least equal in size (number of bedrooms and square footage)and amenities as the on-site market rate units, and any comparative deficiency in size or amenities must be compensated for by additional Affordable Units, larger Affordable Units, or affordability to households with lower incomes.

The mix of Affordable units must be proportional to the total project unit mix.

Affordable Units may have different interior finishes and features than market- rate units so long as the interior features are durable, of good quality and consistent with contemporary standards for new housing. b. No building permits will be issued for any market-rate units in the Residential Development Project until permits for all Affordable Units have been obtained, unless Affordable Units are to be constructed in phases pursuant to a plan approved by Decision Making Body.
c. Market-rate units in the Residential Development Project will not be inspected for occupancy until all Affordable Units have been constructed, unless Affordable Units are to be constructed in phases pursuant to a plan approved by Decision Making Body.

SEC. 10-17.225 OFF-SITE CONSTRUCTION.

As an alternative to construction of on-site Affordable Units, an Applicant may instead construct Affordable Units not physically contiguous to the development (off-site) if the Decision-Making Body determines that:
a. Off-site construction will further affordable housing opportunities in the City to a greater extent than construction of the required Affordable Units as part of the proposed Residential Development Project;
b. A schedule for completion of the off-site Affordable Units concurrently with completion of the related market-rate units is provided and agreed upon as a condition of approval for the project;
c. The off-site Affordable Units are at least equal in size (number of bedrooms and square footage) and amenities to the Affordable Units that would be provided on-

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site, or any comparative deficiency in size or amenities is compensated for by additional Affordable Units, larger Affordable Units, or affordability to households with lower incomes.
d. The off-site location is suitable for the proposed Affordable Units, consistent with the General Plan and the Housing Element, and will not tend to cause residential segregation
Except as approved by the Decision-Making Body, off-site Affordable Units shall conform with all other requirements in this Article that are applicable to on-site Affordable Units.

SEC. 10-17.230 ADDITIONAL ALTERNATIVES.

An Applicant may also propose additional alternatives not listed in this Article if the Decision-Making Body finds that such an alternative would provide a greater benefit to the City than the other options explicitly described in this Article. An Applicant may also choose to propose any combination of on-site construction, off-site construction, affordable housing in-lieu fee, rental housing, or other alternative that conforms to the provisions of this Article and would at least equal the benefit to the City as the other options explicitly described in this Article. Except as approved by the Decision-Making Body, off-site Affordable Units shall conform with all other requirements in this Article that are applicable to on-site for-sale Affordable Units.

SEC. 10-17.300 RESERVED
SEC. 10-17.400 AFFORDABLE HOUSING IN-LIEU FEE
SEC. 10-17.405 ADOPTION OF AFFORDABLE HOUSING IN-LIEU FEE.

Affordable housing in-lieu fees for Residential Development Projects may be established by resolution of the City Council and amended from time to time as appropriate. Any such fees shall be part of the City's Master Fee Schedule. The fees shall not exceed the cost to the City of mitigating the impact of such developments on the need for affordable housing in the City.

SEC. 10-17.410 PAYMENT OF AFFORDABLE HOUSING IN-LIEU FEE.

Affordable housing in-lieu fees shall be paid either prior to issuance of a building permit for a Dwelling Unit or prior to approval of a final inspection or issuance of an occupancy permit for a Dwelling Unit. Regardless of the option chosen, no final inspection will be approved and no occupancy permit will be issued for any Dwelling Unit unless all required affordable housing in-lieu fees have been paid in full.

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SEC. 10-17.415 USE OF AFFORDABLE HOUSING IN-LIEU FEE.

The affordable housing in-lieu fee shall be placed in the Affordable Housing Trust Fund and used as described in Sections 10-17.1000—10-17.1010.

SEC. 10-17.500 IMPLEMENTATION OF AFFORDABLE HOUSING PLAN SEC. 10-17.505 GENERAL.

The provisions of this Article shall apply to all agents, successors and assignees of an Applicant or property owner proposing a Residential Development Project governed by this Article. No discretionary or ministerial permit shall be issued for any Residential Development Project unless in compliance with the terms of this Article.

SEC. 10-17.510 AFFORDABLE HOUSING PLAN.

Unless the Applicant proposes to pay affordable housing in-lieu fees consistent with Section 10-17.400—10-17.415, an Applicant shall submit an Affordable Housing Plan (AHP) as part of the earliest application for a Residential Development Project. In accordance with the Permit Streamlining Act, the Planning Director shall determine whether the AHP is complete. The elements of a complete AHP are described below. If the AHP is incomplete, the AHP will be returned to the Applicant with a list of the deficiencies or the information required. No application for a discretionary or ministerial permit to which this Article applies shall be deemed complete until the AHP is deemed complete by the Planning Director. At any time during the review process, the Planning Director may require from the Applicant additional information reasonably necessary to clarify and supplement the application or to determine the consistency of the proposed AHP with the requirements of this Article.

A complete AHP shall include, at a minimum:
a. The location, structure (attached or detached), proposed tenure (for-sale or rental), and size of the proposed market-rate units and Affordable Units and the basis for calculating the number of Affordable Units provided; b. A floor or site plan depicting the location of the Affordable Units; c. The income levels to which each Affordable Unit will be made affordable; d. For Residential Development Projects that require development of units in phases, a plan that addresses the timing of development of the number of Affordable Units proportionate to each proposed phase of development as required by this Article.. Approval of Certificates of Occupancy in each phase is subject to review for completeness, public safety, accessibility, and separation from adjacent and on-going construction activity as determined by the City Engineer and Building Official.
e. A description of any incentives that are requested by the Applicant;

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f. If off-site units, rental units, or other alternatives are proposed under Sections 10-

17.205, 10-17.225, or 10-17.230, the information necessary to support the findings required for approval of such alternatives;
g. A preliminary marketing plan that describes how the Applicant will inform the public, and those within the appropriate income groups, of the availability of Affordable Units;
h. A written statement demonstrating compliance with the requirements of Section 10-17.220 for on-site Affordable Units; and
i. Any other information reasonably requested by the Planning Director to assist with evaluation of the AHP under the standards of this Article.

Affordable Housing Plans that meet all of the requirements of this Article shall be approved by Decision-Making Body. An Affordable Housing Plan that requests a waiver of any of the requirements set forth in this Article shall require approval of the City Council.

SEC. 10-17.515 AFFORDABLE HOUSING AGREEMENT.

An approved Affordable Housing Plan shall be memorialized by an Affordable Housing Agreement (AHA) between the City and the Applicant. The form of the AHA will vary, depending on the manner in which the provisions of this Article are satisfied for a particular Residential Development Project. An AHA must include, at minimum, the following:
a. Description of the development, including whether the Affordable Units will be rented or owner-occupied;
b. The number, size and location of any Extremely Low-, Very Low-, Low- or Moderate-Income Units;
c. Affordability incentives provided by the City (if any), including the nature and amount of any local public funding;
d. Provisions and/or documents for resale restrictions, deeds of trust, rights of first refusal or rental restrictions;
e. Marketing plan requirements for sale or rental of the Affordable Units; f. Provisions for monitoring the ongoing affordability of the Affordable Units, and the process for qualifying prospective resident households for income eligibility; and
g. Any additional obligations relevant to the compliance with this Article.

The form of the AHA resale and rental restrictions, deeds of trust, option agreements and other documents authorized by this subsection must be approved by the City Manager or designee prior to being executed with respect to any Residential Development Project.

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Approval of an AHA is a condition of any discretionary or ministerial permit for any Residential Development Project for which this Article applies, unless the Applicant has proposed to pay affordable housing mitigation fees consistent with Section 10-

17.400—10-17.415.

SEC. 10-17.520 TERM OF AGREEMENT.

All for-sale Affordable Units provided under this Article must be legally restricted to occupancy by Moderate, Low, Very Low, or Extremely Low-Income Households, as applicable, in perpetuity. All rental Affordable Units provided under this Article must be legally restricted to occupancy by Low, Very Low, or Extremely Low-Income Households, as applicable, in perpetuity.

SEC. 10-17.525 RECORDING OF AGREEMENT.

An approved Affordable Housing Agreement must be recorded against the property included in the Residential Development Project prior to approval of any parcel or final map or issuance of any building permit, whichever occurs first. Additional rental or resale restrictions, deeds of trust, option agreements and/or other documents acceptable to the City Manager or designee may also be recorded. In cases where the requirements of this Article are satisfied through the development of off-site units, the Affordable Housing Agreement must simultaneously be recorded against the Residential Development Project site and the property where the off-site units are to be developed.

SEC. 10-17.600 EXEMPTIONS
The requirements of this Article do not apply to the following:
a. The reconstruction of any structures that have been destroyed by fire, flood, earthquake or other act of nature; provided, however, that this Article shall apply to net new Dwelling Units added to a site if the reconstruction of the site increases the total number of Dwelling Units by two or more.
b. Development agreements originally adopted and executed by the City Council prior to January 1, 2004 and any extensions or modifications of those development agreements that did not modify the affordable housing requirements; and any development agreements which specify an alternative requirement for affordable housing.

SEC. 10-17.700 DEVELOPMENT INCENTIVES
This Article confers economic and land use benefits on Residential Development Projects that provide on-site Affordable Units, as set forth below:
a. Density Bonus. The Applicant may apply for a density bonus and other regulatory incentives provided by state law pursuant to Chapter 10, Article 19 of the Hayward Municipal Code. In calculating the number of Affordable Units required by this Article, any additional Dwelling Units authorized as a density bonus

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pursuant to Government Code Section 65915 et seq. ("State Density Bonus Law") shall not be counted toward the base density calculation for the Residential Development Project.
b. Modified Development Standards to Increase Density.
(1) In a residential project which contains single family detached homes, Affordable Units may be attached Dwelling Units rather than detached homes. In a residential project that includes attached multi-story Dwelling Units, Affordable Units may contain only one story.
c. Expedited Processing. Expedited processing of development approvals and permits will be available for Residential Development Projects with on-site Affordable Units, consistent with State law.
d. Technical and Financial Assistance. Upon request, information shall be provided to Applicants regarding objective design guidelines and financial subsidy programs for Residential Development Projects that provide on-site affordable units.

SEC. 10-17.800 ADMINISTRATION OF AFFORDABLE UNITS
SEC. 10-17.805 SELECTION CRITERIA.

No household shall be permitted to occupy an Affordable Unit unless the City Manager or designee has first approved the household's eligibility as a Moderate-, Low-, Very Low-, or Extremely Low-Income Household, as applicable. The Applicant, property owner or property manager shall use an equitable selection method established in compliance with the terms of this Article and approved by the City Manager or designee. A household shall be selected for occupancy of an Affordable Unit based on the following criteria:
a. First Priority: Person(s) displaced by activity of the Hayward Housing Authority, the Hayward Redevelopment Agency or the City, the City's code enforcement activities
b. Second Priority: Person(s) who live or work within the City of Hayward. b. Third Priority: All other eligible households.

SEC. 10-17.810 CONFLICT OF INTEREST.

The following individuals are ineligible to purchase or rent an Affordable Unit: City employees and officials (and their immediate family members) who have policy-making authority or influence regarding City housing programs and do not qualify as having a remote interest as provided by California Government Code; the Applicant and its officers and employees (and their immediate family members); and the property owner and its officers and employees (and their immediate family members).

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SEC. 10-17.815 OCCUPANCY.

Any household who occupies an Affordable Unit must occupy that unit as the household's principal residence. Should the household cease to occupy the Affordable Unit as its principal residence, the household will be in default of its resale restriction or lease.

The City may, in its sole discretion, grant a temporary waiver of this occupancy requirement for hardship.

SEC. 10-17.820 RESALE OF FOR-SALE AFFORDABLE UNITS.

The initial and subsequent sales price of for-sale Affordable Units must be set at Affordable Ownership Cost.
a. Transfer of Restrictions. When the ownership of a for-sale Affordable Unit is transferred, each new owner must sign an Affordable Housing Agreement consistent with the provisions of this Article.
b. Resale. The maximum sales price permitted on resale of a for-sale Affordable Unit shall be the lower of (1) fair market value or (2) the seller's lawful purchase price, increased by, as determined by the City, (a) the rate of increase of Area Median Income during the seller's ownership or (b) the rate at which the Consumer Price Index for All Urban Consumers, San Francisco Area, increased during the seller's ownership. To the extent authorized in the resale restrictions or Affordable Housing Agreement recorded against the property, seller may recover, at time of sale, the value of capital improvements made by the seller (for which there are receipts) and the seller's necessary and usual costs of sale. The City Manager or designee may authorize an increase in the maximum allowable sales price to achieve such recovery. Capital improvements are limited to new construction.

Repairs of any type, including but not limited to roofs, bathrooms and kitchens, are not considered capital improvements.

SEC. 10-17.825 OPTION TO PURCHASE - FOR-SALE AFFORDABLE UNITS.

In the event of a default under the resale restrictions, the City shall have the option to purchase the Affordable Unit following the default by the owner under the terms of the resale restrictions.

It is the responsibility of the seller of an Affordable Unit that is subject to this Article to select a purchaser that meets the income requirements of this Article. Information regarding potential purchasers who may meet the income criteria may be obtained from the City of Hayward or from similar programs offered by other municipalities, lenders, or local housing organizations. The City may establish procedures to review the prospective purchaser's eligibility to purchase an Affordable Unit. If the seller is unable to find an eligible purchaser, the City shall have the option to purchase the Affordable Unit.

In either event, the option price for the Affordable Unit shall equal the price that could be charged to an income-eligible purchaser.

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SEC. 10-17.830 RENTAL AFFORDABLE UNITS.

If rental Affordable Units are provided, the Affordable Units shall be offered to eligible households at Affordable Rent. The owner of rental Affordable Units shall certify each tenant's Household Income to the City Manager or designee at the time of initial rental and annually thereafter. The owner must obtain and review documents that demonstrate the prospective tenant's Household Income and submit such information on a form approved by the City Manager or designee. The City Manager or designee shall review the prospective tenant's eligibility to rent an Affordable Unit. No tenant may move into an Affordable Unit prior to authorization by the City Manager or designee.

SEC. 10-17.835 MARKETING PLAN.

Owners of rental Affordable Units may fill vacant Affordable Units by selecting income- eligible households in accordance with the approved marketing plan. Marketing Plans must be consistent with affirmatively furthering fair housing policies and include providing marketing materials in multiple languages as required by the City.

SEC. 10-17.840 COMPLIANCE REPORTS.

Owners of rental Affordable Units shall submit annual compliance reports summarizing the occupancy of each Affordable Unit. Annually, the owner shall re-certify all tenants for income-eligibility and submit an annual report. The forms and format used will be the same as those specified for the Tax Exempt Multifamily Mortgage Bond Program or other State or federal housing subsidy program approved by the City.

SEC. 10-17.845 SUBSEQUENT RENTAL TO INCOME-ELIGIBLE TENANT.

The owner shall apply the same rental terms and conditions to tenants of Affordable Units as are applied to all other tenants, except as required to comply with this Article (e.g., rent levels, occupancy restrictions and income requirements) or with other applicable government subsidy programs. The owner shall manage and operate the Affordable Units in compliance with federal and state fair housing laws.

SEC. 10-17.850 CHANGES IN TENANT INCOME.

If, after moving into an Affordable Unit, a tenant's Household Income exceeds the income limit for that Affordable Unit, the following shall apply:
a. If the tenant's Household Income does not exceed the income limits of other Affordable Units in the Residential Development Project, the owner may, at the owner's option, allow the tenant to remain in the original Affordable Unit and re- designate the Affordable Unit as affordable to households of a higher income level, as long so the next vacant Affordable Unit is re-designated for the income category previously applicable to the tenant's household.

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b. If there are no Affordable Units available at the tenant's increased income level, the tenant's rent shall be raised to 30 percent of the tenant's actual monthly Household Income or fair market rent, whichever is lower. If the tenant is paying fair market rent, the next vacant Dwelling Unit that is comparable in size (number of bedrooms, bathrooms, square footage, etc.) to the original Affordable Unit shall be designated as an Affordable Unit at the income level previously applicable to the Dwelling Unit converted to market rate. However, if the Affordable Units are financed with federal tax credits, the following shall apply: if, upon recertification, a tenant's Household Income exceeds 70 percent of AMI, the owner shall charge the existing tenant rent equal to the amount permitted under the rules and regulations of the Internal Revenue Service and the California Tax Credit Allocation Committee, and the owner shall rent the next available Dwelling Unit to a Very Low Income Household for Affordable Rent.

SEC. 10-17.900 ADJUSTMENTS AND WAIVERS
SEC. 10-17.905 APPLICATION FOR ADJUSTMENTS AND WAIVERS.

As part of an application for the first approval of a Residential Development Project, an Applicant may apply for a reduction, adjustment, or waiver of the requirements of this Article based upon a showing that applying the requirements of this chapter would result in an unconstitutional taking of property or would result in any other unconstitutional result. The Applicant shall set forth in detail the factual and legal basis for the claim, including all supporting technical documentation.
.+.-
SEC. 10-17.910 CONSIDERATIONS.

In making a determination on an application to adjust or waive the requirements of this Article, the City Council may assume each of the following when applicable: (a) the Applicant will benefit from any incentives included in this Article; (b) the Applicant will be obligated to provide the most economical Affordable Units feasible in terms of construction, design, location and tenure; and (c) that the Applicant is likely obtain other housing subsidies where such funds are reasonably available.

SEC. 10-17.915 ACTION ON ADJUSTMENT OR WAIVER.

The City Council, based upon legal advice provided by or at the behest of the City Attorney, may approve a reduction, adjustment, or waiver if it determines that applying the requirements of this chapter would effectuate an unconstitutional taking of property or otherwise have an unconstitutional application to the property. The reduction, adjustment, or waiver shall be approved only to the extent necessary to avoid an unconstitutional result, after adoption of written findings and based on legal analysis and the evidence. If a reduction, adjustment, or waiver is granted, any change in the residential or nonresidential project shall invalidate the reduction, adjustment, or waiver, and a new application shall be required for a reduction, adjustment, or waiver pursuant to this Section. If the City Council

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determines no violation of the United States or California Constitutions would occur through application of this Article, the requirements of this Article shall remain applicable.

SEC. 10-17.1000 AFFORDABLE HOUSING TRUST FUND
SEC. 10-17.1005 TRUST FUND.

There is hereby established a separate Affordable Housing Trust Fund ("Fund"). This Fund shall receive all affordable housing in-lieu fees and may also receive monies from other sources.

SEC. 10-17.1010 PURPOSE, LIMITATIONS AND ADMINISTRATION.

Monies deposited in the Fund must be used to increase the supply of housing affordable to Moderate-, Low-, Very Low-, or Extremely Low-Income households in the City, through new construction, acquisition of affordability covenants and substantial rehabilitation of existing housing, or provision of other residential facilities, including emergency shelters and transitional housing, if those facilities mitigate the impact of market-rate housing on the need for affordable housing. Up to fifteen (15)percent of revenue may be used to cover reasonable administrative costs associated with the administration and implementation of this Article.

The Fund shall be administered by the City Manager or designee, who may develop procedures to implement the purposes of the Fund consistent with the requirements of this Article and any adopted budget of the City.

SEC. 10-17.1100 ENFORCEMENT
SEC. 10-17.1105 MISDEMEANOR.

It shall be a misdemeanor for any person to sell or rent an Affordable Unit at a sales price or rent exceeding Affordable Rent or Affordable Ownership Cost or otherwise to violate any of the provisions of this Article.

SEC. 10-17.1110 CITY ACTIONS.

The City may institute actions in law or equity for violations of this Article and may suspend or revoke any discretionary or ministerial permit upon finding a violation of any of the provisions of this Article, an approved Affordable Housing Agreement, or any documents, such as resale restrictions and rent regulatory agreements, entered into by the City to implement the requirements of this Article.

Section 2. Severance.

If any section, subsection, paragraph or sentence of this Ordinance, or any part thereof, is for any reason found to be unconstitutional, invalid or beyond the authority of the City of

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Hayward by a court of competent jurisdiction, such decision shall not affect the validity or effectiveness of the remaining portions of this Ordinance.

Section 3. Effective Date.

This ordinance shall become effective thirty (30) days after adoption by the City Council.

INTRODUCED at a regular meeting of the City Council of the City of Hayward, held the _____ day of _____, 2023, by Council Member __________________________.

ADOPTED at a regular meeting of the City Council of the City of Hayward, held the _____ day of _____, 2023, by the following votes of members of said City Council.

AYES: COUNCIL MEMBERS:

MAYOR:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

APPROVED: _______________________________________
Mayor of the City of Hayward

DATE: _____________________________________________

ATTEST: _____________________________________
City Clerk of the City of Hayward

APPROVED AS TO FORM:

_________________________________________
City Attorney of the City of Hayward

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HAYWARD CITY COUNCIL

RESOLUTION NO. 23-____

Introduced by Council Member _____________

RESOLUTION AMENDING RESOLUTOIN 17 -167 UPDATING THE

AFFORDABLE HOUSIG IN-LIEU FEE

WHEREAS, to assure that future housing development in the City of Hayward (the "City") contributes to the production of residential units in the City that are affordable to very low, low - and moderate-income households and mitigates its impact on the need for affordable housing in the City, the City Council has considered and introduced on this same date an ordinance to amend the Affordable Housing Ordinance (Chapter 10, Article 17 of the City's Municipal Code) (the "Affordable Housing Ordinance"); and

WHEREAS, the Affordable Housing Ordinance authorizes the imposition of Affordable Housing In-Lieu Fees on for-sale and rental residential developments to provide funds equal to the cost of providing affordable housing on-site and to mitigate the impact of market-rate housing development on the need for affordable housing, where applicants elect to pay Affordable Housing In-Lieu Fees rather than provide affordable units on- or off-site; and

WHEREAS, to ensure that the Affordable Housing In -Lieu Fees adopted by this Resolution do not exceed the cost of providing affordable housing on -site or the actual affordable housing impacts attributable to the development projects on which the fee is imposed, the City Council has received and considered a report from Strategic Economics, Inc dated February 1, 2023 and entitled " Hayward Affordable Housing Ordinance Study ," which includes, among other information, an affordability gap analysis, a financial feasibility analysis, and an on-site compliance cost analysis (the " SE Study"); and

WHEREAS, the SE Study found that the Affordable Housing In -Lieu Fees imposed by this Resolution are economically feasible and will not pose a constraint on the construction of housing in the City; and

WHEREAS, the City Council now desires to amend the Affordable Housing Impact Fees previously adopted under Resolution 1 7-167 and to adopt Affordable Housing In -Lieu Fees for residential developments as authorized by the Affordable Housing Ordinance; and

WHEREAS, notice of the hearing on the proposed fee was published twice in the manner set forth in Government Code Section 6062a as required by Government Code Sections 66004 and 66018; and

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WHEREAS, adoption of this Resolution is exempt from the California Environmental Quality Act because the adoption of this Resolution is not a project, in that it is a government funding mechanism which does not involve any commitment to any specific project. ( CEQA Guidelines Section 15378( b) ( 4).)

NOW, THEREFORE, BE IT RESOLVED, the City Council hereby amends the Resolution 17-167 as follows:

Section 1 is hereby amended to add sub-section H as follows:

H. Based on the SE Study, the proposed updated Affordable Housing In-Lieu Fees are economically feasible and will not pose a constraint on housing production.

Section 3.1. is hereby amended as follows: delete and replace in its entirety to read:

1. Residential Development Projects – Ten Units or More

a. High-Density Condominiums
(35 units per acre or more) $19.35/Square Foot of Habitable Space* b. Lower Density Ownership Housing $26.00/Square Foot of Habitable Space* (Less than 35 units per acre)
c. All Other Dwelling Unit Types $23.46/Square Foot of Habitable Space* *Notes:

Affordable housing in -lieu fees shall be paid either prior to issuance of a building permit or prior to approval of a final inspection or issuance of an occupancy permit. Fees paid at occupancy shall be increased by 10 percent.

"Habitable Space" means floor area within a dwelling unit designed, used, or intended to be used exclusively for living and sleeping purposes and exclusive of vent shafts, eaves, overhangs, atriums, covered entries and courts and any portion of a structure above ground used for parking, parking aisles, loading areas, or accessory uses.

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IN COUNCIL, HAYWARD, CALIFORNIA _______________________, 2023

ADOPTED BY THE FOLLOWING VOTE:

AYES: COUNCIL MEMBERS:

MAYOR:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ATTEST: ______________________________________
City Clerk of the City of Hayward

APPROVED AS TO FORM:

_________________________________________
City Attorney of the City of Hayward

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HAYWARD CITY COUNCIL

RESOLUTION NO. 23-____

Introduced by Council Member _______________

RESOLUTION AUTHOR IZING THE AMENDMENT TO RESOLUTION 23-066, THE RESOLUTION FOR THE CITY OF HAYWARD FISCAL YEAR 202 4 MASTER

UPDATING THE AFORDABLE HOUSING IN-LIUE FEES

WHEREAS, Section 15273 of the California Environmental Quality Act (CEQA) Guidelines states that CEQA does not apply to the establishment, modific ation, structuring, restructuring, or approval of rates, tolls, fares, and other charges by public agencies which the public agency finds are for the purposes of:

1. Meeting operating expenses, including employee wage rates and fringe benefits;

2. Purchasing or leasing supplies, equipment, or materials;

3. Meeting financial reserve needs and requirements;

4. Obtaining funds necessary for capital projects necessary to maintain service within existing services areas; or

5. Obtaining funds necessary to maintain intra-city transfers as are authorized by city Charter; and

WHEREAS, The City Council finds and determines that this action is exempt from CEQA based on the foregoing provisions; and

WHEREAS, In November 2010, California voters approved Proposition 26, which amended Article XIII C of the State constitution regarding the adoption of fees and taxes.

Proposition 26 seeks to assure that taxes, which much be approved by the voters, are not disguised as fees, which can be approved by legislative bodies, such a s a city council. The proposed amendment to the Master Fee Schedule (MFS) is compliant.

WHEREAS, to ensure that the Affordable Housing In -Lieu Fees adopted by this Resolution do not exceed the cost of providing affordable housing on -site or the actual affordable housing impacts attributable to the development projects on which the fee is imposed, the City Council has received and considered a report from Strategic Economics, Inc dated February 1, 2023 and entitled " Hayward Affordable Housing Ordinance Stud y," which includes, among other information, an affordability gap analysis , a financial feasibility analysis, and an on-site compliance cost analysis (the " SE Study");

ATTACHMENT V

Page 2 of 4 ends

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Hayward hereby adopts certain changes in the Master Fee Schedule relating to Affordable Housing In-lieu fees, as reflected in Exhibit A.

BE IT FURTHER RESOLVED, that this action is determined to be exempt from CEQA review for the reason stated herein.

IN COUNCIL, HAYWARD, CALIFORNIA _______________________, 2023

ADOPTED BY THE FOLLOWING VOTE:

AYES: COUNCIL MEMBERS:

MAYOR:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ATTEST: _______________________________________
City Clerk of the City of Hayward

APPROVED AS TO FORM:

___________________________________________
City Attorney of the City of Hayward

ATTACHMENT V

Page 3 of 4 ends

Exhibit A
Affordable Housing In-Lieu Fee
1 Residential Development Projects - Ten Units or More a High-Density Condominiums
(35 units per acre or more)
$19.35 Square Foot of
Habitable Space*
Lower Density Ownership Housing
(Less than 35 units per acre)
$26.00 Square Foot of
Habitable Space*
b All other Dwellings Unit Types $23.46 Square Foot of Habitable Space*
*NOTE: Affordable Housing In -Lieu Fees shall be paid either prior to issuance of a building permit or prior to approval of a final inspection or issuance of an occupancy permit. Fees paid at occupancy shall be increased by 10 percent.

Regardless of the option cho sen, no final inspection will be approved and no occupancy permit will be issued for any Dwelling Unit unless all required Affordable Housing In-Lieu Fees for the project have been paid in full.

Habitable Space" means floor area within a Dwelling Unit designed, used, or intended to be used exclusive ly for living and sleeping purposes and exclusive of vent shafts, eaves, overhangs, atriums, covered entries and courts and any portion of a structure above ground used for parking, parking aisles, loading areas, or accessory uses.

2 Residential Development Projects - Two to Nine Units Projects of two to nine units shall pay the following percentage of the fee calculated pursuant to Section 1 above:

ATTACHMENT V

Page 4 of 4 ends

Number of Units in the Project Percentage of Calculated Fee 2 50%
3 67%
4 75%
5 80%
6 83%
7 86%
8 88%
9 89%

3 Fractional Units
If an applicant provides on-site Affordable Units under Chapter 10, Article 17 of the Hayward Municipal Code and elects to pay Affordable Housing In-Lieu Fees for a fractional unit, the fractional in-lieu fee payment shall be calculated as follows:

Fractional Unit/Total Affordable Unit Requirement x Per Square Foot Fee x Total Habitable Square Footage in the Project

4 Applications for Residential Development Projects of Two or More Units Deemed Complete as of December 20, 2017

a Projects receiving all discretionary approvals by February 1, 2018: Affordable Housing Impact Fees in effect on December 20, 2017.
b Projects not receiving all discretionary approvals by February 1, 2018, provided that all discretionary approvals and building permit(s) are obtained within two (2) years of December 20, 2017: 50% of the Affordable Housing In-Lieu Fee calculated under either Section 3(1) or Section 3(2) of Resolution No. 17-167, as applicable, depending on the size of the project.

AYWARD AFFORDABLE HOUSING

ORDINANCE STUDY

PUBLIC DRAFT REPORT
Prepared for:

City of Hayward
February 1, 2023

ATTACHMENT VI
Hayward Affordable Housing Ordinance Study 1

TABLE OF CONTENTS
TABLE OF CONTENTS ................................ ................................ ................................ ............................. 1 TABLE OF FIGURES ................................ ................................ ................................ ................................ . 2 EXECUTIVE SUMMARY ................................ ................................ ................................ .................... 4 INTRODUCTION ................................ ................................ ................................ ............................... 9 Purpose of Study .................................................................................................................................. 9 Relationship Between Financial Feasibility and Affordable Housing Production ............................. 9 Existing AHO and Comparison to Peer Cities ................................................................................... 14 FINANCIAL FEASIBILITY ANALYSIS APPROACH AND ASSUMPTIONS ................................ ........ 21 Approach ............................................................................................................................................ 21 Feasibility Analysis Assumptions ...................................................................................................... 23 FEASIBILITY ANALYSIS AND IN-LIEU FEE RESULTS ................................ ................................ .. 31 Initial Feasibility Analysis Results..................................................................................................... 31 Alternative Inclusionary Policies Analysis ........................................................................................ 34 In-Lieu Fee Analysis ........................................................................................................................... 37 SUMMARY OF POLICY DIRECTION AND ROLE OF THE AHO IN ADDRESSING DISPLACEMENT .... 42 AHO Policy Support for Preventing Displacement ........................................................................... 44 AHO UPDATE RECOMMENDATIONS ................................ ................................ ......................... 44 APPENDIX A: GLOSSARY OF KEY TERMS ................................ ................................ ............................. 48 Definitions from Current AHO ........................................................................................................... 48 Definitions of Other Key Terms ........................................................................................................ 49 APPENDIX B: FEASIBILITY ANALYSIS DETAILS ................................ ................................ ..................... 50 Feasibility Assumptions .................................................................................................................... 50 Pro Forma Results ............................................................................................................................. 51

Hayward Affordable Housing Ordinance Study 2

TABLE OF FIGURES
Figure 1: Current AHO Inclusionary Requirements (Share of Total Project Units) .................................. 4 Figure 2: Recommended Changes to Inclusionary Requirements ........................................................... 5 Figure 3: In-Lieu Fee Recommendations .................................................................................................... 7 Figure 4: Components of Financial Feasibility: Project Value and Project Cost Components ............. 11 Figure 4: Share of Households Who Are Cost Burdened in Hayward and Alameda County, by Tenure, 2021 .......................................................................................................................................................... 11 Figure 5: Definition of Income Limits for Alameda County based on California Code of Regulations and HCD ............................................................................................................................................................ 12 Figure 6: Potential Impact of Inclusionary Policies on Financial Feasibility .......................................... 13 Figure 7: Project Revenue and Development Costs for Affordable Housing Projects .......................... 14 Figure 8: Current AHO Inclusionary Requirement (Share of Total Project Units) ................................. 15 Figure 9: Comparison of Inclusionary Requirements in Hayward vs. “Peer Cities” ............................. 17 Figure 10: Inclusionary Requirements by City and Tenure, from 2018-2021 ...................................... 18 Figure 11: Number of Permitted Inclusionary Housing Units in “Peer Cities,” by Type, 2018-2021 .. 18 Figure 12: Total Units Permitted, 2018-2021, by City, Income Level, and Funding Approach............ 19 Figure 13: Share of Local Funding by Source for Proposed and Entitled Affordable Housin g Projects, Fremont and Hayward, To Be Completed From 2015-2023 ................................................................. 20 Figure 14: Hayward 5th and 6th Cycle RHNA Housing Needs and 5th Cycle Permitting Progress ..... 20 Figure 15: Overview of Prototype Assumptions ...................................................................................... 24 Figure 16: Hayward Housing Prototype Example Images ....................................................................... 25 Figure 17: Hayward Housing Market Tiers and Corresponding Prices or Rents ................................... 26 Figure 18: Maximum Affordable Sale Price for Ownership Units, by Type, Income, and Bedrooms ... 28 Figure 19: Maximum Affordable Rent in Hayward, Effective 2022. ..................................................... 28 Figure 20: Hard Costs, by Prototype ........................................................................................................ 29 Figure 21: Overview of Soft Cost Assumptions ....................................................................................... 29 Figure 22: City of Hayward Municipal Fees, Excluding In-Lieu Fees ...................................................... 30 Figure 23: Developer Financing Cost Assumptions ................................................................................ 30 Figure 24: Site Acquisition Cost per Square foot, By Market Tier .......................................................... 31 Figure 25: Residual Land Value Results Under Existing AHO On -Site Inclusionary Requirements, By Market Tier ................................................................................................................................................ 33

Hayward Affordable Housing Ordinance Study 3 Figure 26: Residual Land Value Results for Tier Two – With and Without Current AHO Compliance Options ....................................................................................................................................................... 34 Figure 27: Feasibility results For Policy Alternatives -- Moderate-Income Units Only ........................... 35 Figure 28: Feasibility Results for Policy Alternatives – with 50/50 Split Between Low and Moderate- Income Units ............................................................................................................................................. 35 Figure 29: Tier 1 Sensitivity Analysis for Single Family and Townhomes with 17% Inclusionary Requirements – Moderate-Income Units Only ........................................................................................ 36 Figure 30: Tier 1 Sensitivity Analysis for Single Family and Townhomes with 12% Inclusionary Requirements – 50/50 Split between Moderate- and Low-Income Units ............................................ 36 Figure 31: Affordable Unit Revenue and Costs – Ownership Prototypes .............................................. 38 Figure 32: Affordability Gap and Equivalent In-Lieu Fees – Ownership Products ................................ 39 Figure 33: Supportable Debt per Unit – Rental Prototypes ................................................................... 40 Figure 34: Affordability Gap Per Unit, and Equivalent In-Lieu Fee Per Square Foot of Project ............ 40 Figure 35: In-Lieu Fees or Affordable Housing Impact Fees in Hayward (Current AHO) and Peer Communities, Applied to Hayward Prototypes ........................................................................................ 41 Figure 36: Recommended Changes to Inclusionary Requirements ...................................................... 45 Figure 37: In-Lieu Fee recommendations ............................................................................................... 47 Figure 38: Square Feet per Unit and Share of Units by Bedroom Size Assumptions ........................... 50 Figure 39: Multifamily and Retail Rent and Revenue Assumptions ...................................................... 50 Figure 40: Financing Cost Calculations, by Prototype (in Millions of Dollars) ....................................... 50 Figure 41: Tier Two Full Pro Forma results - with Current AHO Requirements (In Millions of Dollars) 51 Figure 42: Tier One Full Pro Forma Results with Recommended Changes to AHO: Maintaining Current Requirements for Condos and Rental Prod ucts; Requiring 6% Low and 6% Mod. Units for SF and TH Products (In Millions of Dollars) ............................................................................................................... 52

Hayward Affordable Housing Ordinance Study 4

EXECUTIVE SUMMARY
The City of Hayward uses a variety of policy tools in its efforts to produce affordable housing and meet the State of California’s Regional Housing Needs Allocation (RHNA) requirements. One such tool is the City’s Affordable Housing Ordinance (AHO) . The AHO seeks to increase the production of affordable housing via requirements that housing developers either include deed-restricted affordable housing units as part of their projects or provide other contributions. The primary ways developers can comply with Hayward’s AHO are by dedicating a certain percentage of their project’s units as “inclusionary” deed-restricted affordable housing, or by paying an “in-lieu” fee that the City can use to fund affordable housing programs and production. The City may also, at it s discretion, approve an alternative mitigation proposed by a project developer.

The City of Hayward initiated this study of the AHO’s inclusionary and in-lieu fee requirements to ensure the AHO optimizes the production of affordable housing. Strategic Eco nomics completed a development financial feasibility analysis to evaluate the impacts of current AHO requirements and potential changes to these requirements on a variety of housing development “proto types” under varying submarket conditions found within H ayward. The analysis also included an “affordability gap analysis” to identify corresponding in-lieu fee levels . Another component of the analysis compared inclusionary and in -lieu fee requirements across several peer communities and examined recent affordable housing production in those communities.

The AHO study incorporated input and feedback from a variety of stakeholders and decisionmakers. A Technical Advisory Committee (TAC), consisting of five developers with local experience, met twice to vet analysis assumptions, results, and recommendations. City staff gathered community input on housing priorities via a survey activity conducted at two Fair Housing Workshops and a Housin g Fair.

The Homelessness-Housing Task Force (HHTF) reviewed analysis results and provided policy guidance, and the recommendations described in this report were presented to the Planning Commission for comment on December 8, 2022. The City of Hayward intends to use the results of this study to inform potential changes to the affordability requirements and in-lieu fee levels specified in its AHO.

The current Hayward AHO applies to all projects with at least two units. For ownership housing projects that are less than 35 units per acre, the AHO requires that ten percent of units in a project be dedicated to moderate-income households. For ownership housing projects at a density of 35 units per acre or greater, the AHO requires that 7.5 percent of units are dedicated to moderate-income households. For rental projects, the AHO requires that at least six percent of units in a development are designated as affordable units—split evenly between very low-income households and low-income households. These rental requirements are the same regardless of density.

FIGURE 1: CURRENT AHO INCLUSIONARY REQUIREMENTS (SHARE OF TOTAL PROJECT UNITS)

Required Affordability Level as a Share of
Total Dwelling Units Total
Inclusionary
Requirement Type of Project Very Low Low Moderate
Ownership Projects
Less than 35 dwelling units per acre 10% 10%
35 or more dwelling units per acre 7.5% 7.5%
Rental Projects
All densities 3% 3% 6%
Source: City of Hayward AHO, 2017; Strategic Economics, 2023.

Hayward Affordable Housing Ordinance Study 5

INCLUSIONARY POLICY RECOMMENDATIONS AND RELATED CONCLUSIONS Strategic Economics recommends maintaining current inclusionary requirements for rental products and high -density ownership products, while increasing the required inclusionary percentage and deepening affordability requirements for low -density ownership products. The recommendation for ownership projects that are less than 35 dwelling units per acre (single family homes and townhomes) is to increase the required total inclusionary percentage from ten percent to 12 percent, split evenly between low -income households and moderate -income households. This is a departure from the current AHO policy, which only requires that these ownership products provide affordable units for moderate-income households. Figure 2 summarizes these changes.

FIGURE 2: RECOMMENDED CHANGES TO INCLUSIONARY REQUIREMENTS

These recommendations were informed by the following stakeholder input and analysis conclusions:
• The majority of the analyzed rental housing prototypes are currently not feasible within Hayward, regardless of the level of AHO requirements or submarket “tier.” This aligns with current development conditions, as developers have not proposed any major market -rate rental projects since adoption of Hayward’s current AHO requirements. Reduction or elimination of affordable housing requirements is not expected to significantly improve feasibility for these multifamily products due to their wide gap between achievable revenues and construction costs.

• The recommended requirements are within a typical range of s even “peer” cities for which Strategic Economics reviewed inclusionary policies and affordable housing production outcomes.

o As shown in the Existing AHO and Comparison to Peer Cities analysis on page 14, Hayward’s current inclusionary requirements are relatively lower than peer communities, yet these low requirements led to production of a relatively high number of affordable low - and modera te-income housing units. Inclusionary requirements should be set at a level that does not encourage developers to build projects in nearby communities instead of Hayward. Inclusionary on -site units we re also the primary Current Requirements
•Rental
•3% very low-income
•3% low-income
•Ownership: <35
du/acre
•10% moderate-
income
•Ownership: >35
du/acre
•7.5% moderate-
income
Recommendations
•Rental
•3% very low-income
•3% low-income
•Ownership: <35
du/acre
•6% low-income
•6% moderate-income
•Ownership: >35
du/acre
•7.5% moderate-
income

Hayward Affordable Housing Ordinance Study 6 means by which Hayward and peer communities produce deed-restricted housing for moderate-income households.

• The peer cities and policy analyses also suggested the importance of maintaining inclusionary requirements at a level that supports the financial feasibility of new development.

o Some jurisdictions, such as Fremont, may be able to sustain higher inclusionary requirements because they have higher market-rate rents that could support the cost of affordable units.
o In Hayward, t he Inclusionary Policy Alternatives Findings on page 35 indicate that single-family homes and townhomes are only margin ally feasible at a 15 percent requirement—the level used by some peer communities.

• The City’s Homelessness-Housing Task Force (HHTF) expressed a preference for maintaining existing rental requirements to ensure developers are obligated to provide inclusionary or in - lieu fee contributions if development conditions improve in the future.

• A condominium prototype (a higher-density ownership product) is not currently feasible under any market tier within Hayward, and developers are not proposing condominiums in Hayward.

• Strategic Economics found through sensitivity testing that a 12 percent requirement for low and moderate-income households applicable to low-density ownership products (single-family homes and townhomes) would allow projects to maintain feasibility w hile also sustaining increases in construction costs of up to four percent. In contrast, a higher required percentage would re sult in these projects becoming infeasible with the slightest negative change in development conditions. See the Sensitivity Analysis section on page 36 for further details.

• The HHTF expressed a preference for increasing ownership requirements, but not to such a point that they block housing development if project costs and revenues shift in the near term.

IN-LIEU FEE RECOMMENDATIONS AND RELATED CONCLUSIONS
Strategic Economics recommends maintaining the current level of in-lieu fees for rental products and high-density ownership products, while increasing the fee for low -density ownership products to $26 per habitable square foot. The goal of these recommendations is to strike a balance between generating revenue for producing affordable units while ensuring that the fee does not prevent development activity . The recommended changes represent a relatively small increase in total development costs.

Hayward Affordable Housing Ordinance Study 7 FIGURE 3: IN-LIEU FEE RECOMMENDATIONS

These recommendations were informed by the following stakeholder input and analysis conclusions:
• The affordability gap analysis found that the in-lieu fee amount required to build off-site deed- restricted affordable housing equivalent to the revised inclusionary requirements would be $29.26 per square foot for single-family homes and $16.92 per square foot for townhomes.

• Among other considerations, i n-lieu fees should be set at a level that does not encourage developers to build projects in nearby communities instead of Hayward. The maximum effective in-lieu fee for ownership products among Hayward’s “peer” communities is $44 per square foot of habitable space, but the median fee is closer to Hayward’s current level.

• The maximum in-lieu fee for rental products among Hayward’s peer communities is approximately $30 per square foot, while the median fee is close to Hayward’s current level.

o Based on the affordability gap, the in -lieu fee for rental products would be between $29 per square foot and $40 per square foot.
o However, rental products are largely not feasible under existing AHO requirements; maintaining a lower in -lieu fee for rental projects increases the possibility of development occurring if conditions improve in the future.

• The Homelessness-Housing Task Force supported increasing AHO requirements on low-density ownership products while m aintaining consistent requirements for high -density ownership housing and rental products.

• Analysis of affordable housing funding data for Hayward and Fremont demonstrated the importance of i n-lieu fee revenues as a local funding source for production of 100 percent affordable housing projects . These projects can provide a deeper level of affordability than what can be achieved through inclusionary units. These projects can also provide permanent supportive housing units and housing units for extremely low -income households —serving community members who are at high risk for displacement or homelessness.

Current In-Lieu
Requirements
•Rental
•$21.64/sf
•Ownership: <35 du/acre
•$21.64/sf
•Ownership: >35 du/acre
•$17.85/sf
In-Lieu Recommendations
•Rental
•$21.64/sf
•Ownership: <35 du/acre
•$26/sf
•Ownership: >35 du/acre
•$17.85/sf

Hayward Affordable Housing Ordinance Study 8 • Lastly, TAC members noted that financial considerations for in-lieu fees or provision of on-site units differ from project to project, and that flexibility is important for ensuring that they can find a feasible approach for future projects.

The full discussion of the research and findings described in this executive summary can be found throughout the remainder of this report. The “Existing AHO and Comparison to Peer Cities ” section beginning on page 14 describes Hayward’s current AHO requirements and compares Hayward’s requirements and production of inclusionary housing to nearby East Bay communities. Further explanation of feasibilit y results, sensitivity testing, and in -lieu fee analysis is provided in the “Feasibility Analysis and In-Lieu Fee Results” section on page 31.

In addition, this report includes two appendices. Appendix A: Glossary of Key Terms includes a glossary of key terms and definitions which are otherwise also defined throughout the report narrative .

Appendix B: Feasibility Analysis Details provides detailed tables describing the feasibility assumptions and results, including unit size calculations, cost calculations, and detailed pro forma results.

Hayward Affordable Housing Ordinance Study 9

INTRODUCTION
Purpose of Study
Hayward’s Affordable Housing Ordinance (AHO) provides a framework through which developers of new market-rate housing projects are required to provide affordable housing units or support the development of affordable housing through other means. This ordinance is a type of inclusionary housing policy. Inclusionary housing policies work by requiring market -rate developers to dedicate a portion of their project’s total units to be permanently affordable to moderate-, low-, or very low-income households. In most communities, developers also have the option of complying with the requirements by paying a fee instead. This fee, known as an in-lieu fee, can be used to substitute for some or all of the required affordable units in the housing project. Developers may also pr opose an alternative means of complying with the AHO, with approval at the City’s discretion.

The goal of this study was to identify potential changes to the AHO that would help maximize the production of affordable housing in Hayward. Hayward’s AHO was most recently updated in 2017. At that time, the City of Hayward increased the AHO’s in -lieu fee and reduced the project size threshold to which requirements apply. However, since th at time, the COVID -19 pandemic altered market conditions for housing development, meaning that the development assumptions upon which the AHO requirements were changed are no longer the same. Therefore, t he purpose of th is study wa s to identify the current market context for development feasibility and to analyze how changes to the AHO could be structured to increase production of affordable housing without curtailing market-rate housing production due to unsupportable requirements.

The remainder of the report consists of five sections:
• II: Introduction: The remainder of the Introduction describes approaches to affordable housing production, financial feasibility, and how inclusionary policies can be used to help produce affordable housing;
• III: Financial Feas ibility Analysis Approach and Assumptions : This section explains the approach and assumptions used for analyzing financial feasibility of different housing types. • IV: Feasibility Analysis and In-Lieu Fee Results: This section focuses on the feasibility analysis results and analysis of how policy changes would impact development feasibility for different types of housing.
• V: Summary of Policy Direction and Role of the AHO in Addressing Displacement: This section describes stakeholder and decisionmaker input that was used to guide the analysis and AHO recommendations, and describes the role of the AHO in addressing displacement concerns. • V: AHO Update Recommendations : This section presents final recommendations for both inclusionary requirements and in-lieu fees.

Relationship Between Financial Feasibility and Affordable Housing Production
Because inclusionary housing policies like Hayward’s AHO seek to leverage the activities of the private market to produce affordable housing, they are reliant on the financial feasibility of market -rate housing projects. This means inclusionary and in-lieu fee policies are reliant on some factors outside

Hayward Affordable Housing Ordinance Study 10 of the City’s control. Cities can control what types of housing are allowed on each parcel using land use regulation, and whether particular project proposals are approved. However, a city cannot control whether developers propose projects within those regulations, nor the exact composition of proposed projects. Developers will only propose projects that they assess as being feasible to construct.

Requirements to provide inclusionary affordable units or pay a certain level of additional fees influence development feasibility for market-rate housing developers by reducing revenues or increasing costs.

Thus, for an inclusionary policy to contribute to affordable housing production, its requirements must be high enough that they result in the production of new affordable units, but not be so high that they prevent market-rate housing projects from being feasible. This makes it important to identify how different affordability requirements for inclusionary units relate to the total revenue and expenses of a project.

On the other hand, requiring deeper levels of affordability or higher in-lieu fee contributions can help Hayward meet its affordable housing development goals through multiple means of affordable housing production. Thus, the content of this section explains why financial feasibility of housing development matters for setting inclusionary policies ; how “affordable” housing is defined and affects financial feasibility considerations; and how inclusionary policies fit within the context of overall affordable housing production in a community.

FINANCIAL FEASIBILITY
From a market -rate housing developer’s perspective, development projects are only financially feasible when the market value of the project (based on total revenue) exceeds project costs and investment return. As shown in Figure 4, this is determined by the following factors. • Total project revenue is determined by the market value of the project. o For for-sale projects, the market value consists of the sales prices the units can obtain. o For rental projects, the market value of the project depends on the annual revenue it will generate and the current capitalization rate , which reflects overall project investment risk relative to alternative investments.

• Total project costs include hard costs, soft costs, investment return, and land costs. o Hard costs include materials and labor associated with phys ical construction of the building.
o Soft costs include indirect expenses such as architecture and engineering, taxes, insurance, financing costs, and municipal fees.
o Investment return consists of the required financial return on investment that a project must achieve to attract developer and lender investment. o Land costs refer to the price the developer pays to acquire the land.

Each of these factors is very dynamic; project costs and revenues can fluctuate significantly, and many factors, such as the market -rate price of housing, are beyond the City’s direct sphere of influence.

Instead, the market -rate price of housing is set by local market demand —which may rise and fall according to the availability of housing supply, presence of amenities, or other factors in the market.

Hayward Affordable Housing Ordinance Study 11 FIGURE 4: COMPONENTS OF FINANCIAL FEASIBILITY: PROJECT VALUE AND PROJECT COST COMPONENTS

Source: Strategic Economics, 2022.

HOUSING AFFORDABILITY AND “AFFORDABLE HOUSING” DEFINITIONS Housing prices are considered affordable if a household pay s less than 30 percent of its monthly income on housing costs; in Hayward, many households’ expenses are currently exceeding this threshold. Households whose expenses are exceeding 30 percent of their income are referred to as housing “cost -burdened.” Figure 5 displays the share of households in both Alameda County and Hayward that are cost burdened. Approximately 37 percent of households in Hayward are housing cost burdened—implying that the market-rate price of housing of their current unit is too high for them to afford with their current household income.

FIGURE 5: SHARE OF HOUSEHOLDS WHO ARE COST BURDENED IN HAYWARD AND ALAMEDA COUNTY, BY TENURE, 2021

Source: U.S. Census, American Community Survey, 1-YR, 2021; Strategic Economics, 2022.

Note: Hayward’s combined cost-burdened household percentage is 37 percent.

Deed-restricted affordable housing units help to reduce cost -burdens for households within specific income categories. In the context of this report, “affordable housing ” refers to units with deed - restrictions limited to households earning certain incomes. Affordable housing units target households within select income categories, which are based on the area median income (AMI) of a region. Rents and sales prices are set at below market-rate (BMR) levels so that households pay no more than 30 Land Costs
Hard Costs
Soft Costs
Market Value
Investment
Return
53%
25%
49%
28%
0% 10% 20% 30% 40% 50% 60%
Renters
Owners
Renters
Owners
Hayward
Alameda
County
Share of Renters or Owners Whose Housing Costs Exceed 30 Percent of Their Income

Hayward Affordable Housing Ordinance Study 12 percent of the targeted income level for their income category.1 Each year, the California Department of Housing and Community Development (HCD) publishes income limits for every county corresponding to its AMI and standard affordable housing income categories. Figure 6 shows the percentage of AMI that falls into each income category in Alameda County.

FIGURE 6: DEFINITION OF INCOME LIMITS FOR ALAMEDA COUNTY BASED ON CALIFORNIA CODE OF REGULATIONS AND HCD
Income Category AMI Level
Acutely Low-Income 0% to 15%
Extremely Low-Income >15% to 30%
Very Low-Income >30% to 50%
Low-Income >50% to 76.8%
Moderate-Income >76.8% to 120%
Above Moderate-Income >120%
Sources: California Department of Housing and Community Development, 2022; Strategic Economics, 2022.

Note: These percentages were calculated from income limits for Alameda County that are determined by HCD and published annually in Title 25 of the California Code of Regulations, Section 6932. “Moderate-income” limits generally start at or above 80% of AMI.

AFFORDABLE HOUSING PRODUCTION TOOLS
In order to produce housing units with rents or sales prices that are below market-rates, jurisdictions often u se either public or private forms of subsidy. Two of the mos t common types of affordable housing production tools are inclusionary housing policies —which require private subsidy—and 100 percent affordable housing programs—which primarily leverage public subsidy to produce affordable housing.

INCLUSIONARY HOUSING POLICIES
Inclusionary housing policies work by requiring market-rate housing developers to subsidize affordable housing units directly. Typically, this is done by requiring developers to set aside a certain percentage of their project’s housing units to be deed-restricted affordable housing. Alternatively, an inclusionary policy may allow developers to pay an affordable housing fee, “in -lieu” of providing on -site units, or allow them to assist with the production of affordable units in some other way. In such a policy, the goal is to use the revenue generated by market-rate housing units to cross-subsidize development of affordable units.

These policies have the benefit of potentially producing affordable housing units without requiring public subsidy, but also drive down financial feasibility by reducing the total revenue and market value of the project. Because inclusionary units generat e less revenue per unit than market -rate units, requiring developers to substitute them for market -rate units will reduce the project’s total revenue.

Figure 7 visualizes this impact on the project’s overall feasibility. This figure also illustrates the purpose of conducting a feasibility analysis —to identify an inclusionary requirement level that allows projects to generate enough revenue to proceed while also providing BMR units.

1 This practice does not entirely eliminate housing cost burden for low -income households. Because maximum costs are based on a target income level for each group of households, housing cost burden can still occur in cases where the household’s income is below the target income level for their category. However, the BMR restrictions reduce the households’ housing cost burdens below the levels of market rate rents.

Hayward Affordable Housing Ordinance Study 13 FIGURE 7: POTENTIAL IMPACT OF INCLUSIONARY POLICIES ON FINANCIAL FEASIBILITY

Source: Strategic Economics, 2022.

Another benefit of inclusionary policies is that they give local governments more flexibility in determining which income levels to target. Jurisdictions with inclusionary policies can choose whether the policies target moderate-, low-, or very low-income populations, and can also implement different requirements for different housing products, such as ownership or rental projects. Thus, inclusionary policies can be used to target income thresholds— such as moderate -income households—that may not typically be supported by other forms of affordable housing. This flexibility can help local jurisdictions achieve their affordable housing goals and meet state regional housing needs allocations.

However, because inclusionary requirements only produce affordable housing units or fee revenues if market-rate housing developers choose to pursue projects, jurisdictions must incorporate consideration of financial feasibility impacts on future development projects when setting inclusionary requirements.

AFFORDABLE HOUSING PROJECTS
The other common approach to produce affordable housing is to use public subsidy to fund p rojects in which all units are affordable. These projects are typically referred to as 100 percent affordable projects. The largest source of funding for many of these projects comes from the federal Low-Income Housing Tax Credit (LIHTC), which gives inves tors a dollar -for-dollar credit on their tax liability in exchange for equity contributions to an affordable housing development. In a 100 percent affordable housing project, the developer must assemble a funding “stack” consisting of a variety of federal, state, local, and private funding sources to offset the costs of producing the units—which are typically much higher than the revenue that will be generated from the deed -restricted affordable units. This process is illustrated in Figure 8, which shows the funding gap these projects have because of the reduced revenue they can raise from the BMR units.

Land Costs
Hard Costs
Soft Costs
Market Value
Market Value
Investment
Return
All Market Rate Units Market Rate + BMR
Units
Development Costs

Hayward Affordable Housing Ordinance Study 14 FIGURE 8: PROJECT REVENUE AND DEVELOPMENT COSTS FOR AFFORDABLE HOUSING PROJECTS

Source: Strategic Economics, 2022.

Affordable housing projects can often leverage more diverse funding sources and achieve deeper levels of affordability than inclusionary housing projects, but available funding can be highly competitive or difficult to obtain . Federal and state funding sources have the benefit of being less sensitive to changing market conditions than private financing. However, f ederal and state funding sources often have a li mited pool of resources and can only be accessed through a competitive application process. In addition, they often require the use of local matching funds in order to receive funding. Inclusionary policies can be an important resource to provide local mat ching funds: if developers elect to comply with inclusionary policies by paying in-lieu fees instead of providing on-site units, those funds can be used to help support financing for other 100 percent affordable housing projects. In this way, inclusionary policies can be used to support both on -site affordable units and affordable units in 100 percent affordable projects —which in tandem produce more housing opportunity diversity in relation to income levels and tenure.

Existing AHO and Comparison to Peer Cities
Housing production in Hayward does not occur in a vacuum; developers often construct housing in many different areas, and differences in inclusionary requirements between regions can have an impact on where they choose to develop housing. Therefore, this section describes Hayward’s current inclusionary housing requirements and compares them to other nearby communities that could be viewed as Hayward’s “peers.” Seven communities were selected for comparison with Hayward based on their similarity to Hayw ard’s population size, as well as various characteristics of their housing markets: median rents, home values, age of housing , types of housing, and amount of recent construction activity.

This comparison of Hayward’s affordable housing production and developers’ use of its inclusionary policy to other Bay Area Cities revealed several key findings, described in greater detail in this section:
• Hayward’s current inclusionary requirements are relatively lower than most “peer” communities; yet these low require ments led to production of a relatively high number of Land Costs
Hard Costs
Soft Costs
Market
Value
Investment
Return
Funding
Gap
0 5
10 15
20 25

Hayward Affordable Housing Ordinance Study 15 affordable low- and moderate-income housing units. This result implies that Hayward’s lower inclusionary requirements allowed market -rate housing development to remain financially feasible and therefore be built along with the corresponding inclusionary units. • Inclusionary on -site units are the primary means of producing deed -restricted housing for moderate-income households.
o Shifting away from moderate income requirements in an inclusionary policy would eliminate the primary means of delivering these units.
• In-lieu fees raised from inclusionary policies are one of the primary local funding sources for communities to support 100 percent affordable projects. • In order to achieve its affordable housing goals, Hayward will need to increase its production of affordable units at all income levels.
o The AHO is likely to be an important tool for producing both moderate and lower-income affordable units because it can produce both inclusionary units and fee revenue needed to subsidize 100 percent affordable housing.

CURRENT HAYWARD AFFORDABLE HOUSING ORDINANCE REQUIREMENTS The current Hayward AHO establishes different requirements depending upon the tenure type, size, and residential density of a proposed housing development. Figure 9 summarizes the current requirements based on housing density and housing tenure. • For ownership housing projects , the AHO has different requirements depending on the residential density.
o For projects that are less than 35 dwelling units per acre (du/acre):
 Ten percent of units are required to be dedicated to moderate -income households.
o For projects at a density of 35 units per acre or more:
 7.5 percent of units are required to be dedicated to moderate -income households.
• For rental projects, requirements are the same regardless of density. o Three percent of units are required to be dedicated to very low-income households, and
o Three percent of units are required to be dedicated to low -income households, for a total of six percent.

FIGURE 9: CURRENT AHO INCLUSIONARY REQUIREMENT (SHARE OF TOTAL PROJECT UNITS)

Hayward Affordable Housing Ordinance Study 16

PEER CITY INCLUSIONARY REQUIREMENTS
Hayward’s current inclusionary requirements are lower than the required percentages in many of its “peer” communities, and many communities require deeper levels of affordability than Hayward. The only exceptions are Newark, which uses impact fees instead of requiring on-site units; Concord, which has a lower requirement than Hayward for ownership units; and Richmond, which uses in -lieu fees only for rental projects. Five of the six peer cities with ownership inclusionary policies require developers to provide units to both low - and moderate -households, while Hayward only requires provision of moderate-income units in its ownership projects. These requirements are shown in Figure

10. Fremont’s inclusionary requirements were among the highest among peer communities from 2015 to 2021, but were revised downwards i n 2021. For-sale requirements were revised down from around 20 percent to 15 percent, while rental requirements were revised from 12 to 10 percent. City staff cited three reasons for revising the total requirements: simplifying the ordinance, becoming more comparable to other jurisdictions, and making the on -site option more realistic for developers. Staff indicated that since the ordinance was adopted in 2015, no for -sale developers had elected to build on-site inclusionary units. 2 Both the previous and c urrent requirements for Fremont are shown in Figure 10.

2 City of Fremont, Affordable Housing Ordinance Update Staff Report, October 2021.

Hayward Affordable Housing Ordinance Study 17

FIGURE 10: COMPARISON OF INCLUSIONARY REQUIREMENTS IN HAYWARD VS. “PEER CITIES” Set-Aside Requirement by Project Size Minimum Size
Threshold
Affordability Target by Tenure Date
Enacted Rental For-Sale Rental Ownership
Hayward All projects: 6%
Projects > 35 du/acre:

7.5%
Projects < 35 du/acre:
10%
2 units Very low and low-
income Moderate-income 2017
Concord
Either 10 percent at low
income, or six percent at
very low income
Either 10 percent at
moderate income, or six
percent at low income
5 units or more for
all residential
projects
Very low, low and
moderate income
Low and Moderate-
income 2021
El Cerrito 10% of units 12% of units
Rental or Combo
Rental/Sale: 9 units
For Sale only: 10
units
Very low and low-
income Moderate-income 2018
Fremont All projects: 10%
15% of units:
5% moderate
10% low-income
2 units Very low and low-
income
Low and Moderate-
income 2021
Fremont
(old) All projects 12.9% 18% for attached

21.6% for detached 2 units
Extremely low, very
low, low, and
moderate
Extremely low, very
low, low, and
moderate
2002
Newark (Impact fee only) (Impact fee only)
Richmond
In-lieu fee is default.

Developer can provide on-
site units. No % specified.

One of the following:

Moderate: 17%
Low Income: 15%
Very Low Income: 10%
10 units Very low, low, and
moderate income
Very low, low, and
moderate income 2020
San
Leandro
Roughly 15% - rounded to
the nearest unit.

Roughly 15% - rounded to
the nearest unit
4 for rental, 2 for
ownership
Very low and low-
income
Low and Moderate-
income 2006
Union City All projects: 15% All projects: 15% 7 Very low and low- income
Low and Moderate-
income 2018
Source: Municipal Ordinances, 2022; Strategic Economics, 2022.

Hayward Affordable Housing Ordinance Study 18

COMPARISON OF HOUSING PRODUCTION OUTCOMES
Hayward has produced more inclusionary units than its peer communities in recent years, likely because Hayward has lower inclusionary requirements. Figure 11 shows the required inclusionary percentages at the time that those units were produced while Figure 12 shows the total number of inclusionary units produced by product type. While housing markets differ from city to city, these charts illustrate that many communities with higher requirements are not producing any inclusionary units at all. One exception to this trend is F remont. However, F remont is among the strongest residentia l markets in the region, meaning that residential projects can achieve higher market -rate revenues to offset losses from including greater amounts of inclusionary units . According to C oStar, the average effective monthly rent per square foot for multifamily units in Fremont was $3.15, while the effective rent per square foot for units in Hayward was $2.68.3
FIGURE 11: INCLUSIONARY REQUIREMENTS BY CITY AND TENURE, FROM 2018-2021

Source: Municipal Codes and Inclusionary Ordinances, 2022; Strategic Economics, 2022.

Note: In cases where the percentage depends on project density or affordability level, this chart reflects the average of all compliance options. Fremont’s required inclusionary percentages changed in 2021. This chart displays the previous requirements. The required levels of affordability within these inclusionary requirements varies; see the previous table for details.

FIGURE 12: NUMBER OF PERMITTED INCLUSIONARY HOUSING UNITS IN “PEER CITIES,” BY TYPE, 2018-2021

Source: California HCD, RHNA Annual Progress Report, 2022; Strategic Economics, 2022.

3 CoStar, East Bay – CA. Multi-Family Market Report, 2022. 0%
5%
10%
15%
20%
25%
Concord El Cerrito Fremont Hayward Newark Richmond San
Leandro
Union City
% Inclusionary as Share of
Units
Owner Renter
0 20
40 60
80 100
120
Owner RenterOwner Renter Owner Renter Owner RenterOwner RenterOwner RenterOwner RenterOwner Renter Concord El Cerrito Fremont Hayward Newark Richmond San Leandro Union City Housing Units
Multifamily SF Attached SF Detached ADUs, Mobile Homes

Hayward Affordable Housing Ordinance Study 19

Affordable housing projects are the primary source of production for low- and very low-income housing units; however, inclusionary policies are the primary way that Hayward and its “peer” communities are permitting deed-restricted units for moderate-income households. These types of units are not typically produced via 100 percent affordable housing projects, because projects receiving federal funding are required to target incomes at 80 percent of AMI or below —that is, low -income, very low-income, or extremely low-income households. As shown in Figure 13, the only way that deed-restricted moderate- income housing units were produced in Hayward or its peer communities from 2018 to 2021 was through inclusionary housing policies.

FIGURE 13: TOTAL UNITS PERMITTED, 2018-2021, BY CITY, INCOME LEVEL, AND FUNDING APPROACH

Source: California HCD, RHNA Annual Progress Report, 2022; Strategic Economics, 2022.

Inclusionary housing policies also contribute to the production of low and very low-income units in 100 percent affordable projects by providing an important source of local funding for these projects. When developers elect to pay in -lieu fees instead of providing on -site units, these fees go into affordable housing trust funds, which are a significant source of local funding for 100 percent affordable housing projects. In Hayward, over 20 percent of local funds for these projects came from affordable housing trust fund revenue since 2015—supported by in-lieu fees. The majority of remaining funds came from one-time funding sources such as Alameda County’s A-1 bond measure and public land contributions.

In Fremont, the percentage of local revenue supported by in -lieu fees is even higher, at almost 80 percent. This illustrates that on-site inclusionary housing is not the only way that inclusionary housing policies like Hayward’s AHO can support the production of affordable housing. 0 50
100
150
200
250
300
350
400
Concord
El Cerrito
Fremont
Hayward
Newark
Richmond
San Leandro
Union City
Concord
El Cerrito
Fremont
Hayward
Newark
Richmond
San Leandro
Union City
Concord
El Cerrito
Fremont
Hayward
Newark
Richmond
San Leandro
Union City
Very Low Income Low Income Moderate Income
Total Units Permitted
100% Affordable Inclusionary

Hayward Affordable Housing Ordinance Study 20 FIGURE 14: SHARE OF LOCAL FUNDING BY SOURCE FOR PROPOSED AND ENTITLED AFFORDABLE HOUSING PROJECTS, FREMONT AND HAYWARD, TO BE COMPLETED FROM 2015-2023

Source: City of Hayward, 2022. City of Fremont, 2022.

Note: Hayward’s largest “Other” sources were Alameda County A1 bond revenue and public land contributions.

In order to achieve its affordable housing goals, Hayward will need to find ways to increase its affordable housing production overall and maximize the effectiveness of its AHO. These affordable housing goals are described in Hayward’s State-mandated Regional Housing Needs Allocation (RHNA).

Every eight years, California HCD uses population projections and affordable housing needs to set goals for housing production for each region of the state. These goals are allocated to each jurisdiction in the Bay Area by the Association of Bay Area Governments (ABAG). The resulting allocation is referred to as RHNA. Each eight-year period is called a “Cycle” and Hayward is currently completing its 5th Cycle, which ends on January 31 st, 2023. Figure 15 summarizes Hayward’s projected progress towards its 5th Cycle goals, alongside the number of housing units for each income level that the City has been allocated for the 6th Cycle—which will begin in 2023. This shows that Hayward is falling well short of its affordable housing goals—particularly for moderate-income housing. Hayward will need to substantially increase its rate of moderate-income housing production to meet its 6th Cycle RHNA goals, but the City will also need to increase production of low and extremely low or very low-income housing. This means that production of moderate -income units through on -site inclusionary requirements and in-lieu fee revenues raised through the AHO will both be important for Hayward to achieve its 6th Cycle goals.

FIGURE 15: HAYWARD 5TH AND 6TH CYCLE RHNA HOUSING NEEDS AND 5TH CYCLE PERMITTING PROGRESS

Source: City of Hayward, 2022; Strategic Economics, 2022.

Note: For 5th Cycle Estimated Compliance, this chart includes pipeline projects as well as those that had already been permitted. 0%
20%
40%
60%
80%
100%
Affordable Housing
Trust Fund (Fee
Revenue)
CDBG HOME Other
% of Local Funding
Contribution
Fremont % of Local Funding Contribution Hayward % of Local Funding Contribution -
500
1,000
1,500
2,000
2,500
3,000
Extremely Low or Very
Low
Low Moderate Above Moderate
Units Permitted
Income Level
5th Cycle Estimated Compliance 5th Cycle Goal 6th Cycle Goal

Hayward Affordable Housing Ordinance Study 21

FINANCIAL FEASIBILITY ANALYSIS APPROACH

AND ASSUMPTIONS
Strategic Economics performed a financial feasibility analysis to test the extent to which different market-rate housing products can still proceed in Hayward while providing different levels of on -site inclusionary units or in -lieu fee revenues. Strategic Economics worked with City staff and analyzed information about recent projects to create development prototypes, which represent the types of new residential development projects likely to be built in Hayward. Then, Strategic Economics built a pro forma model to test the financial feasibility of different inclusionary requirements or the payment of in lieu fees on each prototype.

This analysis examined the impact of both existing AHO requirements and a variety of alternative AHO policies on feasibility outcomes for each housing prototype. Assumptions used in these analyses were informed by a review of the existing housing development pipeline, interviews with local housing developers, and feedback from the City’s Technical Advisory Committee for the AHO.

This report section describes the following:
o Approach used to develop housing prototypes;
o Approach used for testing financial feasibility;
o Assumptions for development prototypes;
o Assumptions for allowable rents or prices for affordable units within each project type; and o Assumptions used for costs and revenues in feasibility analysis modeling.

Approach

DEFINING DEVELOPMENT PROTOTYPES
In collaboration with City staff, Strategic Economics developed seven representative but generic housing prototypes for analysis in the feasibility assessment. These prototypes represent the range of typical residential developments likely to be proposed in Hayward over the short term. Therefore, these prototypes are mostly based on recently completed projects or current development proposals in the pipeline in Hayward. They include both ownership and rental product types. Characteristics of recent projects were used to develop generalized assumptions for each prototype, which were refined to conform to City policies based on input from City staff as well as input from developers in Hayward and nearby communities. For example, though condominium developments are not common in the recent development pipeline in Hayward, this type of ownership housing was deemed important to include because it would have different requirements than other ow nership projects under the existing Hayward AHO due to the project’s higher density.

FEASIBILITY ANALYSIS

FEASIBILITY METHODOLOGY
Strategic Economics measured the financial feasibility of each prototype using a static pro forma model that solves for the residual land value (RLV) of each project. A pro forma model is a tool that is commonly used to estimate the financial performance of a development project. The base static model reflects today’s market conditions such as prices/rents, construction cos ts, and financing costs.

Hayward Affordable Housing Ordinance Study 22 Residual Land Value represents the value remaining to pay for land after all other project costs and expected revenues are accounted for.

Residual Land Value (RLV) is calculated in four steps:

1. Estimate the total sales revenue for ownership prototypes or the net operating income for the project’s first stabilized year, and the corresponding capitalized value of each rental prototype.

2. Calculate the total supportable value of the project, based on the capitalized value of the project and the developer “target return” (i.e., the current industry standard return on costs the developer would need to pursue the project);

3. Estimate all development costs except land cost. These costs include direct construction costs (“hard” costs) and indirect costs (“soft” costs such as design, engineering, taxes, insurance, professional fees, municipal and development impact fees, and developer overhead, as well as financing costs and a contingency for unanticipated overruns);

4. Subtract the development costs estimated in Step 3 from the total supportable value of the project estimated in Step 2. The result is the residual land value. In real estate economics, the residual land value represents the maximum amount the developer can pay for land for the project to be feasible. This value is compared to prevailing site acquisition costs for each prototype to evaluate project feasibility.

FEASIBILITY ANALYSIS PROCESS
Strategic Economics performed an initial analysis of developm ent feasibility using the requirements of the existing AHO and pro forma assumptions based on input from local developers in Hayward. In addition to conducting market research using secondary data sources, Strategic Economics gathered input from nine diffe rent developers with experience in Hayward to inform these assumptions. The final assumptions are described in the sections that follow. The initial feasibility analysis considered three different scenarios related to the current AHO:

1. Feasibility if complying with the existing AHO by providing on-site units;

2. Feasibility if complying with the existing AHO by paying an in-lieu fee instead of providing BMR units; and

3. As a control scenario, feasibility without any AHO requirements.

For each scenario, Strategic Economics identified three different housing market tiers within Hayward—allowing for analysis of development feasibility in different market contexts within the city.

Based on these results , Strategic Economics gathered input from City staff, City Council , and community members to identify AHO policy alternatives to test for additional feasibility considerations.

Policies considered included reductions to AHO requirements for rental units, increases to percentage requirements for ownership units, and chang es in the income levels required for affordable units.

These findings, alongside feedback from the HHTF , City staff, and local stakeholders, were used to shape final recommendations.

Lastly, Strategic Economics identified the affordability gap associated w ith each prototype and analyzed the appropriate in -lieu fee levels based on each policy alternative. This assessment considered the gap between costs and revenue for off -site units associated with each affordability level of inclusionary requirement and what in-lieu fees would be for each prototype under “peer” city

Hayward Affordable Housing Ordinance Study 23 inclusionary policies. Results from this analysis were used to make final recommendations for in -lieu fees.

Feasibility Analysis Assumptions

DEVELOPMENT PROTOTYPES
As discussed in the previous section, Strategic Economics refined development prototypes in collaboration with the City of Hayward, based on the pipeline of recent projects proposed and completed in the city. The final development prototypes represent a ra nge of residential densities, average unit sizes, building heights, and parking formats. Technical details of these prototypes are shown in Figure 16, while Figure 17 shows example images for each prototype.

These prototypes vary based on the following characteristics:
• Ownership Status: Single-family, townhome, and condo prototypes are all for-sale units, while the remainder would be marketed as rental units.
• Project Density, Mixed-Use, and Building Size
o The single-family prototype represents a project with 44 detached two -story dwelling units on five acres of land.
o The townhome prototype represents a project with 106 attached units on five acres of land. Each unit is three stories in height.
o The condo and stacked flats prototypes each contain 74 units in a four-story building on 1.5 acres of land. This equates to 49 units per acre. o The small multifamily prototype is a 20-unit, three-story apartment building on half an acre of land.
o The wrap prototype includes 300 apartm ent units and 7,500 square feet of retail space in a five-story building on four acres of land. It has 75 dwelling units per acre. o The podium prototype has 159 units in a five -story building on roughly 2.5 acres of land. It is slightly less efficient than the wrap prototype and has 62 units per acre. • Unit Size
o The single-family and townhome prototypes have the largest units, at 2,600 and 1,700 square feet on average per unit.
o The small multifamily prototype has an average unit size of 950 square feet. o The condo, stacked flats, and podium prototypes each have an average unit size of 900 square feet.
o The wrap prototype has an average unit size of 800 square feet. • Parking Formats
o For the single-family and townhome prototypes, each unit has a two-car garage and a driveway for additional parking.
o The small multifamily prototype uses only surface parking , in which a paved ground - level lot surrounds the residential building.
o The condo and stacked flats prototypes use a combination of podium parking (in which housing is built on top of a concrete parking “podium” structure) and surface parking spaces
o The wrap prototype uses a n enclosed concrete parking garage structure with residential and retail space “wrapped” around it.

Hayward Affordable Housing Ordinance Study 24 o The podium prototype uses a first -floor parking “podium” structure, with residential units stacked on top.
 This prototype is designated as a Transit Oriented Development (TOD).

Because it would be located near transit, the podium prototype includes a lower parking ratio than the rest of the rental prototypes, at 1.33 spaces per unit. This parking ratio is about average for recent five -story developments proposed in Hayward.

FIGURE 16: OVERVIEW OF PROTOTYPE ASSUMPTIONS
Prototype
Characteristics
Unit of
Measurement
Single
Family Townhomes Condos
Small
Multifamily
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Tenure Ownership Ownership Ownership Rental Rental Rental Rental Parcel Acreage acres 5.00 5.00 1.50 0.50 1.50 4.00 2.55 Building
Characteristics

Number of
Stories floors 2 3 4 3 4 5 5
Number of
Units
dwelling units
(du) 44 106 74 20 74 300 159
Gross Retail
Area square feet 7,500
Residential
Density du/acre 9 21 49 40 49 75 62
Average Unit
Size square feet 2,580 1,695 900 950 900 800 900 Parking
Parking Format In-unit In-unit Podium +
Surface Surface Podium +
Surface Wrap Podium
Residential
Parking Ratio spaces/unit 2.0 2.0 1.5 1.5 1.5 1.5 1.33 Retail Parking
Spaces parking spaces - - - - - 17 -
Source: Strategic Economics, 2022. Assumptions informed by examples of recent developments in Hayward.

Hayward Affordable Housing Ordinance Study 25 FIGURE 17: HAYWARD HOUSING PROTOTYPE EXAMPLE IMAGES

Single Family Homes Townhomes

Condos or Stacked Flats Small Multifamily

5-Story Wrap 5-Story Podium

Sources: City of Hayward, 2022. Renderings produced by D.R. Horton; KTGY; LANDARC; Taylor Morrison; Humphreys & Partners Architects; and BDE Architecture.

Note: Projects are shown as examples of what the prototypes could look like, but do not reflect the exact prototypes described in the analysis.

Hayward Affordable Housing Ordinance Study 26

UNIT REVENUES AND MARKET VALUE ASSUMPTIONS
Strategic Economics also compiled assumptions for project revenues to use in the pro forma analysis— based on a combination of market research , City and State policy guidelines, and input from local developers in Hayward and nearby communities. This analysis included market-rate revenues for each product type, as well as affordable unit revenue for each prototype calculated using affordable housing regulations. This section documents these assumptions and describes the analyses that informed them.

MARKET-RATE REVENUE AND MARKET TIERS
In order to identify how inclusionary requirements might impact development feasibility in all areas of the city, Strategic Economics defined three different market tiers for identifying market-rate housing prices or rents. Market rate revenues for each prototype are a function of the project’s location, the unit size, and the type of product that is for sale or for rent. Strategic Economics used data from CoStar and Redfin to identify the market tiers, based on examples of current rents and recent housing sales.

Tier One represents the housing market with the highest level of demand and is hi ghlighted in red in Figure 18. This area includes Downtown Hayward and the Mission Boulevard corridor and is where the majority of new market-rate rental housing is currently being constructed. The majority of market-rate ownership housing is currently being constructed in the Tier Two market areas, which is shaded in orange in Figure 18. The remainder of Hayward is designated as Tier Three areas, which command the lowest sales prices or market rents.

FIGURE 18: HAYWARD HOUSING MARKET TIERS AND CORRESPONDING PRICES OR RENTS

Hayward Affordable Housing Ordinance Study 27 Figure 18 also lists multifamily rents per square foot and sales prices per square foot for each tier and product type. These per square foot prices were used in conjunction with assumptions about the bedroom sizes and average square foot per unit to calculate the total market -rate revenue for each unit in each tier. A full table of average bedroom counts and unit sizes is shown in the appendix in Figure 38.

For the ownership prototypes, the total project value was obtained by multiplying the per unit sale price by the total number of units. For the rental prototypes (Prototypes 4 and 5), an in come capitalization approach was used. This approach first estimates the annual net operating income (NOI) of the prototype, which is the difference between project income (annual rents for residential and retail) and project expenses (operating costs and vacancies). The NOI is then divided by the current cap rate to derive total project value. 4 Assumptions for each of these calculations are shown in the appendix in Figure 39.

AFFORDABLE UNIT REVENUES
The maximum allowable rent or sales prices for affordable units are primarily based upon the unit’s number of bedrooms, the area median income, and the assigned household income level associated with the unit. However, for both ownership and rental units, there are other housing costs that factor into the maximum affordable sale price or rent. For ownership products, t he current Hayward AHO allows for inclusion of mortgage principal and interest, homeowner’s insurance, an d homeowner or condo association fees in the calculation of maximum affordable prices . The rental cost calculation includes the monthly rent as well as a utility allowance—as determined by the Alameda County Housing Authority. These provisions ensure that households will not pay too large of a percentage of their monthly income on housing expenses, because costs that would normally be passed on to a tenant or owner are subtracted from the maximum sales price or monthly rent that is allowed under the ordinance.

For affordable ownership products , monthly expenses are limited by Hayward’s current AHO to 35 percent of monthly income. Strategic Economics used California HCD’s annually-published definition of area median incomes by household size alongside the AHO’s income limits as a share of median income to calculate the maximum monthly income for each affordability level available for housing expenses. Additional housing expenses included HOA dues, property taxes, private mortgage insurance, homeowner’s insurance, and interior property insurance. 5 Maximum affordable sales
prices are shown in Figure 19.

4 According to a 2022 Lee & Associates market report, the current average cap rate for multifamily in the East Bay is 4.1 percent.
5 These assumptions were informed by data from Freddie Mac, Zillow, Property Tax Shark, JVM Lending, and QuoteWizard.

Hayward Affordable Housing Ordinance Study 28 FIGURE 19: MAXIMUM AFFORDABLE SALE PRICE FOR OWNERSHIP UNITS, BY TYPE, INCOME, AND BEDROOMS Product Type and Income Studio 1-BD 2-BD 3-BD 4-BD 5-BD Single-Family
Very Low Income $191,345 $213,483 $233,009 $242,168 Low Income $238,660 $266,699 $292,147 $306,027
Moderate Income $475,231 $532,777 $587,836 $625,321 Townhomes
Very Low Income $187,825 $208,600 $221,161
Low Income $241,040 $267,737 $285,020
Moderate Income $507,119 $563,426 $604,314
Condos
Very Low Income $155,061 $175,246 $192,186 $206,087 $204,559 Low Income $196,454 $222,561 $245,402 $265,225 $268,418 Moderate Income $403,415 $459,132 $511,480 $560,914 $587,712 Source: California HCD, 2022; Strategic Economics, 2022.

Notes:

Assumes that monthly housing expenses are capped at 35 percent of monthly income for each income level. Assumes homeowner’s association dues of $0.07 per sf for single-family, $0.24 per sf for townhomes, and $0.37 per sf for condos. Assumes an annual effective property tax rate of 1.37% of the sales price and a private mortgage insurance premium of 0. 85% of the mortgage amount. Uses a 30- year loan term with an annual interest rate of 5.22%, the current 30- year mortgage interest rate according to Freddie Mac.

Maximum monthly rents were calculated by using the AHO’s income guidelines, with monthly expenses capped at 30 percent of the targeted income level. In order to calculate maximum rents based on this percentage of each income level, Strategic Economics subtracted monthly utility allowances, calculated for each unit size annually by the Alameda County Housing Authority. Resulting maximum rents are shown in Figure 20. For both ownership and rental housing, Hayward’s AHO standards assume that the expected number of residents in a household is one plus the number of bedrooms .

For example, rents for a studio assume a household size of one person, rents for a one-bedroom unit assume a household size of two persons, and rents for a two-bedroom unit assume a household size of three persons. These assumptions are used for calculating rent, but do not constitute an occupancy limit for each unit. An income capitalization approac h was also applied to BMR units to derive total residential value of those units within inclusionary projects—using the same per-unit assumptions for operating costs as the market-rate units.

FIGURE 20: MAXIMUM AFFORDABLE RENT IN HAYWARD, EFFECTIVE 2022.

Bedroom Size Studio 1-BR 2-BR 3-BR
Very Low $1,249 $1,428 $1,606 $1,785
Low $1,499 $1,714 $1,928 $2,142
Moderate $2,749 $3,142 $3,534 $3,927
Sources: Alameda County Housing Authority, 2022; U.S. Department of Housing and Urban Development, 2022; Strategic Economics, 2022.

DEVELOPMENT COSTS
Strategic Economics compiled assumptions for development costs based on market research and input from developers in Hayward and nearby communities. As explained in the financial feasibility overview, total development costs are a combination of hard costs, soft costs, land costs, and required developer return. Hard costs refer to the construction costs associated with the physical construction

Hayward Affordable Housing Ordinance Study 29 of the building, while soft costs include all “indirect” expenses required to construct the building, such as architecture, engineering, taxes, contingency, municipal fees, and financing costs.

HARD COSTS
Hard costs for each prototype differed primarily based on the materials used to construct the building and the cost of parking associated with each prototype. Assumptions for hard costs, shown in Figure 21, included estimates for basic site improvements and construction costs for residential areas, retail areas, and parking structures. For the 5-story wrap prototype, hard costs also included allowances for the retail space. This includes a higher per-square foot cost of construction for the retail shell, as well as a tenant improvement allowance for retail tenants to modify their space to fit their needs. This allowance was an additional $70 per net square foot of retail space.

FIGURE 21: HARD COSTS, BY PROTOTYPE
Hard Costs
Single Family
Development
Town-
homes Condos
Small
Multifamily
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Site Prep (per sf) $25 $25 $25 $25 $25 $25 $25
Construction Type Type V Type V Type V Type V Type V
Type IIIA,
Type I
Type IIIA,
Type I
Residential (per gsf) $150 $185 $250 $250 $250 $300 $325 Retail (per gsf) $340
Parking Costs (per
space)
Surface $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 $6,500 Podium $45,000 $45,000 $45,000 $45,000 $45,000 $45,000 $45,000 Wrap $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 $40,000 Sources: Developer Interviews, 2022. Strategic Economics, 2022.

SOFT COSTS
Soft costs include items such as architectural fees, engineering fees, insurance, taxes, legal fees, accounting fees, marketing costs, developer overhead, and City fees. In addition, Strategic Economics assumed a hard cost contingency of five percent and additional soft costs of two percent; these figures provide buffers for unexpected fluctuations in hard costs or unanticipated expenses. In cluding City fees, these soft costs represent a n approximately 25 to 30 percent addition to hard costs.

Assumptions for most of these costs are shown in Figure 22.

FIGURE 22: OVERVIEW OF SOFT COST ASSUMPTIONS
Soft Costs Unit Value
Architecture, Engineering, Taxes, Developer Overhead % of hard costs 12% Other Soft Costs % of hard costs 2%
Hard Cost Contingency % of hard costs 5%
Municipal Fees and Permits As Calculated by City
Marketing Costs for Single Family % of sales value 4%
Sources: CoStar, 2022. Developer Interviews, 2022; Strategic Economics, 2022.

Hayward Affordable Housing Ordinance Study 30 Municipal fees include building permit expenses such as plan checks and inspections as well as impact fees for parks, traffic, and water. City fees were calculated for the individual prototypes by City staff. These figures are shown in Figure 23
FIGURE 23: CITY OF HAYWARD MUNICIPAL FEES, EXCLUDING IN-LIEU FEES

Calculations for financing costs included considerations for amount financed, outstanding loan balances, loan fees, and annual interest rates. Assumptions for these costs are shown in Figure 24, while final calculated costs are shown in the appendix in Figure 40. Total financing costs accounted for 3.7 percent to 4.2 percent of total project hard and soft costs. Strategic Economics’ calculations assumed a five percent interest rate, which is higher than typical, but reflects the fact that interest rates have risen substantially in recent years.

FIGURE 24: DEVELOPER FINANCING COST ASSUMPTIONS
Financing
Costs Units
Single
Family Townhomes Condos
Small
Multifamily
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Amount
Financed
(Loan-to-cost)
% of direct +
soft costs 70% 70% 65% 65% 65% 60% 60%
Average
outstanding
balance
% of Amt
Financed 55% 55% 55% 55% 55% 55% 55%
Construction
Loan Fee
% of Amt
Financed 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Construction
Interest
(annual) Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Term Months 18 18 18 18 18 24 24
Source: Developer Interviews, 2022. Strategic Economics, 2022.

LAND COSTS
Strategic Economics reviewed recent land sales prices throughout the city to estimate the site acquisition costs by market tier. Like rents and sales prices, land prices also differ based on the location and zoning characteristics of each parcel. Sales prices of individual parcels differ substantially based on site-specific conditions, but the figures in Figure 25 represent an expected average price for land within each market tier.

Single
Family Townhomes Condos
Small
Multiplex
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Total
Municipal
Fees $2,726,553 $5,252,895 $2,529,120 $583,175 $2,614,221 $8,014,224 $4,638,684 Fees per
Unit $61,967 $49,556 $34,177 $29,159 $35,327 $26,714 $29,174 Source: City of Hayward, 2022; Strategic Economics, 2022.

Note: Does not include in-lieu fees.

Hayward Affordable Housing Ordinance Study 31 FIGURE 25: SITE ACQUISITION COST PER SQUARE FOOT, BY MARKET TIER Hayward Submarket Unit Value
Market Tier 1 per square foot $75
Market Tier 2 per square foot $45
Market Tier 3 per square foot $25
Sources: CoStar, 2022. Developer Interviews, 2022.

DEVELOPER RETURN AND FEASIBILITY
Strategic Economics used input from local developers alongside market research from previous studies to refine assumptions for developer return. D evelopers must meet a m inimum market standard for return on their investment in order for the project to be “feasible” and for them to secure financing. Though for -sale and for -rent projects often use different metrics to assess feasibility, Strategic Economics used the metric “ return-on-cost” to ensure consistency in evaluating feasibility across product types. This metric is expressed as the net revenue for the project divided by the total development costs of the project. Based on feedback from local developers, a reasonable minimum standard for return on cost across project types is 20 percent.

FEASIBILITY ANALYSIS AND IN-LIEU FEE RESULTS
Strategic Economics conducted the feasibility analysis in three stages. First, an init ial feasibility analysis was conducted using the current requirements of the AHO. Next, Strategic Economics collaborated with City staff to identify policy alternatives to test and analyze potential changes to the AHO. Lastly, Strategic Economics used the results of the feasibility analysis to identify the affordability gap associated with each prototype and calculate in -lieu fees that would be associated with revised policy scenarios.

Initial Feasibility Analysis Results
Strategic Economics performed an initial analysis of development feasibility considering three different scenarios related to the current AHO. For each scenario, Strategic Economics identified three different housing market tiers within Hayward —allowing for analysis of development feasibili ty in different market contexts within the City. Scenarios considered were as follows:

1. Feasibility if complying with the existing AHO by providing on-site units;

2. Feasibility if complying with the existing AHO by paying an in-lieu fee instead of providing BMR units; and

3. As a control scenario, feasibility without any AHO requirements.

For each scenario, Strategic Economics calculated the Residual Land Value, which represents the value remaining to pay for land after all other project costs and expected revenues are accounted for.

In these results, prototypes are considered feasible if their residual land value exceeds the prevailing value of land. T he charts presenting results of the feasibility analysis thus display two values for comparison:
• The prevailing value of land relevant to each scenario and market tier, and

Hayward Affordable Housing Ordinance Study 32 • The residual land value of each prototype in that scenario and market tier.

The section that follows presents results from all components of this initial feasibility analysis —first, by submarket for the on-site inclusionary scenario and second, by scenario for market tier two.

FEASIBILITY BY SUBMARKET
Under current AHO requirements for on -site units, only single -family developments and townhomes are consistently feasible in all Hayward market tiers. Figure 26 compares the residual land value of all prototypes under the current AHO to land prices by market tier. Other than single-family and townhome projects, the majority of prototypes are not currently feasible in any Hayward market.

The only other feasible prototype is small multifamily (rental), which is only expected to be feasible in the highest-performing markets in Hayward. Because rents are higher in these markets, rental projects are expected to generate more total revenue than elsewhere. However, because land prices are typically around $75 per square foot in these areas, condos and the remainder of prototypical rental projects are still not expected to be feasible in Tier One market areas.

The feasibility outlook is particularly limited for five -story multifamily projects, which have a negative residual land value in all market tiers. This means that in the current development climate, these types of projects are not considered financially feasible even for a developer who has already covered the cost of their land. Based on conversations with local developers, this finding reflects the market reality that construction costs have risen substantially in the last two years without a corresponding increase in rents for these market-rate units.

While neither condominiums nor stacked flats are expected to be feasible, stacked flats are closer to being feasible in all market tiers than cond ominiums. Since the building type assumptions for both prototypes are the same, this result helps explain why condo minium development proposals have been rare in Hayward over the past few years . The feasibility outlook for both prototypes is poor in Tiers Two and Three, but stacked flats especially are expected to come close to being feasible in the highest-value market areas of Hayward. This project type has a Tier One residual land value of $35 per square foot, while typical land prices in this tier are $75 per square foot.

Hayward Affordable Housing Ordinance Study 33 FIGURE 26: RESIDUAL LAND VALUE RESULTS UNDER EXISTING AHO ON-SITE INCLUSIONARY REQUIREMENTS, BY

MARKET TIER

Source: Strategic Economics, 2022.

FEASIBILITY BY AHO REQUIREMENT
Only single-family homes and townhomes are consistently feasible across applications of the current AHO in Tier Two markets. Figure 27 shows feasibility results for each prototype in policy scenarios with either no affordable requirements or a varying application of the current AHO. These results correspond to Tier Two market area land prices. This means that for a project to be feasible, its residual land value must exceed $50 per square foot of land. As shown in Figure 27, only single-family homes and townhomes exceed the price of land in all policy scenarios.

In Hayward’s Tier Two markets, the current AHO requirements do not appear to change development feasibility results for any of the seven prototypes. Most of the higher-density rental projects are currently infeasible, and are not expected to become feasible even if inclusionary housing requirements were eliminated. While eliminating AHO requirements would slightly increase the residual land value for each of the prototypical developments, most still c ould not afford to pay anything at all for the land on which they would be built—much less the $50 per square foot average that is expected in Tier Two markets.

Small multifamily projects are largely infeasible under current AHO requirements, but come the closest to meeting feasibility standards of any rental project type. If the AHO requirements were removed, this project type would come close to development feasibility in Tier Two markets, with a residual land value of $43 per square foot compared to typical land prices of $45 per square foot. $94
$66 $47
$92
$63
$45
-$21
-$108
-$184
$86
$22 -$10$35
-$39
-$76-$63
-$162
-$212
-$177
-$272
-$320-$350
-$300
-$250
-$200
-$150
-$100
-$50
$0
$50
$100
$150
Tier 1 Tier 2 Tier 3
Value per Square Foot of Land
Land Price Single Family Development Townhomes
Condos Small Multifamily Stacked Flats
5-Story Wrap 5-Story Podium (TOD)

Hayward Affordable Housing Ordinance Study 34 FIGURE 27: RESIDUAL LAND VALUE RESULTS FOR TIER TWO – WITH AND WITHOUT CURRENT AHO COMPLIANCE

OPTIONS

Source: Strategic Economics, 2022.

Alternative Inclusionary Policies Analysis
Strategic Economics presented results of the initial feasibility analysis to City staff, the Homelessness- Housing Task Force (HHTF) , and the TAC and gathered input from each group to identify AHO policy alternatives to test for additional feasibility considerations. The City Council members of the HHTF expressed two priorities that informed the development of policy alternatives:
• That rental inclusionary requirements should not decrease, and • That increases to ownership requirements should be modest enough that these projects would retain feasibility even if construction costs were to increase slightly.

Because the prospects for development feasi bility among moderate and high -density residential prototypes were so limited and the HHTF members were not interested in alternatives that would reduce these requirements, Strategic Economics focused its policy changes analysis on alterations to the AHO r equirements for single-family and townhome projects only. The policy analysis focused on the impact of policy changes on Tier One pro forma results because this was the tier in which feasibility margins for ownership projects were most limited due to the commensurate higher land values.

Feasibility testing evaluated the impacts of two policy alternatives for these low-density ownership prototypes:

1. Increasing required percentages of affordable units substantially, while maintaining a focus on moderate-income households; and

2. Increasing required percentages of affordable units slightly, while changing the level of income targeted by affordable units.

Strategic Economics also conducted analysis to assess the sensitivity of the feasibility results to a five percent change in construction costs. The section that follows describes the findings from each of these phases of alternative policy analysis.
$78 $66 $67$72 $63 $53
-$110 -$108 -$129
$43 $22 $23
-$18 -$39 -$41
-$135
-$162
-$166
-$244
-$272 -$274-$300
-$200
-$100
$0
$100
No Affordable Requirements Existing Inclusionary Requirements Existing In-Lieu Fee Requirements Value per Square Foot of Land
Typical Range of Land Prices
Single Family Development (Ownership) Townhomes (Ownership) Condos (Ownership) Small Multifamily (Rental)

Hayward Affordable Housing Ordinance Study 35

INCLUSIONARY POLICY ALTERNATIVES FINDINGS
ALTERNATIVE ONE: MODERATE-INCOME UNITS ONLY
At current development costs, s ingle-family and townhome projects can support a relatively large percentage of moderate -income units without becoming infeasible. Figure 28 presents the findings from policy alternative one, which tested the extent to which inclusionary requirements could increase while maintaining moderate-income requirements only for high-density ownership projects. If the AHO continues to require only moderate -income units for low -density ownership projects, these products could support a maximum of 22 percent inclusionary units while retaining feasibility for both product types.

FIGURE 28: FEASIBILITY RESULTS FOR POLICY ALTERNATIVES -- MODERATE-INCOME UNITS ONLY Single Family Development Townhomes
Alternative Requirements
15% Inclusionary Feasible Marginally Feasible
19% Inclusionary Marginally Feasible Marginally Feasible 23% Inclusionary Infeasible Marginally Feasible
25% Inclusionary Infeasible Infeasible
Source: Strategic Economics, 2022.

Notes:

Projects are considered "Feasible" if Return on Cost is greater than 25%. Projects are considered "Marginally Feasible" if Return on Cost is greater than 20%. Projects are considered "Infeasible" if Return on Cost is less than 20% ALTERNATIVE TWO: SPLIT BETWEEN LOW- AND MODERATE-INCOME UNITS At current development costs, single-family and townhome projects can still support a small increase in inclusionary percentages if they are required to split affordable on -site units between moderate - income and low-income households. Figure 29 presents the findings from policy alternative two, which tested the extent to which inclusionary requirements could increase if low -density ownership requirements were required to provide both low- and moderate-income units . With a n even split between low and moderate-income units, single-family and townhome projects can retain feasibility with up to a maximum of an 18 percent total inclusionary requirement.

FIGURE 29: FEASIBILITY RESULTS FOR POLICY ALTERNATIVES – WITH 50/50 SPLIT BETWEEN LOW AND MODERATE-

INCOME UNITS
Single Family Development Townhomes
Alternative Requirements
12% Inclusionary Feasible Marginally Feasible
15% Inclusionary Marginally Feasible Marginally Feasible 19% Inclusionary Marginally Feasible Infeasible
22% Inclusionary Infeasible Infeasible
Source: Strategic Economics, 2022.

Notes:

Hayward Affordable Housing Ordinance Study 36

SENSITIVITY ANALYSIS
However, the currently-supported inclusionary requirement would be highly sensitive to slight changes in construction costs. Based on HHTF feedback, Strategic Economics analyzed the sensitivity of policy alternatives to increases in construction costs, for both moderate-only policies and policies that would also require low -income units. These scenarios analyzed the impact of hard cost increases of up to five percent on the feasibility outcomes for single family and townhome prototypes for each of the policy alternatives. This five percent scenario is well within the range of expected price fluctuations in costs; TAC members expressed that annual development cost increases are often even higher than five percent.

If construction costs increased by as little as four percent, projects with only moderate -income units would be feasible at a maximum of a 17 percent inclusionary requir ement. This represents the sensitivity analysis results from policy alternative one. These sensitivity analysis results are shown in Figure 30.

FIGURE 30: TIER 1 SENSITIVITY ANALYSIS FOR SINGLE FAMILY AND TOWNHOMES WITH 17% INCLUSIONARY REQUIREMENTS – MODERATE-INCOME UNITS ONLY
Scenario # Current Costs Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Increase in Hard Costs of
Construction 0% 1% 2% 3% 4% 5%
Project Type
Single Family Development
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Townhomes
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible Infeasible
Source: Strategic Economics, 2022.

Notes:

If construction costs increased by as little as four percent, projects split evenly between low - and moderate-income households would be feasible at a maximum of a 12 pe rcent inclusionary requirement. This represents the sensitivity analysis results from policy alternative two. These sensitivity analysis results are shown in Figure 31.

FIGURE 31: TIER 1 SENSITIVITY ANALYSIS FOR SINGLE FAMILY AND TOWNHOMES WITH 12% INCLUSIONARY REQUIREMENTS – 50/50 SPLIT BETWEEN MODERATE- AND LOW-INCOME UNITS Scenario # Current Costs Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Increase in Hard Costs of
Construction 0% 1% 2% 3% 4% 5%
Project Type
Single Family Development Feasible Feasible Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Townhomes
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible
Marginally
Feasible Infeasible
Source: Strategic Economics, 2022.

Notes:

Hayward Affordable Housing Ordinance Study 37 The results of the sensitivity analysis, therefore, describe the target for inclusionary requirements suggested by the HHTF: the maximum inclusionary requirements that single family and townhome projects could support in Hayward with slight cost increases. These targets are 17 percent if requiring only moderate -income units, and 12 percent if required units are evenly split between low - and moderate-income units.

In-Lieu Fee Analysis
In an inclusionary housing policy, in -lieu fees are used to enable a City to support development of affordable housing units off-site, when they would otherwise be provided by the market-rate developer as on-site units. As in the example of a 100 percent affordable housing development explained in Figure 8, in-lieu fees are used to fill the funding gap between the market value of an affordable unit and the total development costs for an individual unit . In other words, this “affordability gap” represents the difference between the revenue generated from each affordable unit and the total cost of developing those units.

Calculating this affordability gap on the basis of off -site affordable units is a common means for determining the appropriate in-lieu fee that a City should set in an inclusionary policy. From the City’s perspective, an in-lieu fee that is set to equal the affordability gap could be relatively value neutral; the City could either obtain one affordable unit as part of an inclusionary project, or they could use the money provided by an in -lieu fee payment to build one off -site affordable unit at the same income level. However, it is not the only important factor for determining appropriate in-lieu fees.

In order to determine in -lieu fee recommendations, Strategic Economics also compared potent ial in- lieu fees with current fees being used by Hayward’s “peer communities.” This section presents the results of each of these analyses.

AFFORDABILITY GAP AND CORRESPONDING IN-LIEU FEES
Calculating the affordability gap for each unit is relatively simpl e, but must be converted to a per - square foot basis to estimate the corresponding in-lieu fee. The affordability gap is generally calculated in two simple steps: calculate the revenue that would be raised for each affordable unit, and calculate the total costs of producing each unit. In order to convert this result into an in-lieu fee per square foot, Strategic Economics multiplied the affordability gap per unit by the total number of required affordable units and divided by the square footage of the units in each project. This section presents the resulting affordability gap and in-lieu fee calculations, first for ownership products and then for rental products.

AFFORDABILITY GAP AND IN-LIEU FEE CALCULATIONS FOR OWNERSHIP UNITS Affordability gap calculations for ownership units involve only the sales price of each unit and the cost of producing those units. The total revenue available from affordable units depends on the income level associated with the unit, but the total costs of constructing an affordable unit are the same for all income levels. Figure 32 shows the total revenue for each ownership prototype on a per-unit basis based on the required affordable income level in the inclusionary policy. This average revenue can be compared to total development costs to calculate the overall affordability gap.

Hayward Affordable Housing Ordinance Study 38 FIGURE 32: AFFORDABLE UNIT REVENUE AND COSTS – OWNERSHIP PROTOTYPES

Prototype 1: Single Family
Development
Prototype 2:

Townhomes
Prototype 3:

Condos
Revenue
Average Low Unit $290,412 $268,925 $237,060
Average Moderate Unit $585,945 $567,270 $493,568
50/50 Split, Low & Moderate Units $438,178 $418,098 $365,314 Costs
Land Costs per Unit, Tier 1 $371,250 $154,104 $66,223
Development Costs per Unit,
Excluding Land $696,110 $502,954 $456,904
Total Development Costs $1,067,360 $657,057 $523,127
Sources: Strategic Economics, 2022. HCD, 2022. City of Hayward, 2022. CoStar, 2022.

The affordability gap and equivalent in -lieu fees were calculated for different mixes of inclusionary requirements. The results are shown in Figure 33, which defines the affordability gap per unit, and expresses this gap in the terms that in-lieu fees are structured in Hayward’s AHO—per total square foot of habitable space in each project. Because this fee is calculated on the basis of the total square feet in the entire project, calculating the total in -lieu fee per square foot requires adjusting for the total required affordable units in the project. Three steps were taken to calculate the affordability gap-based in-lieu fee on a per square-foot basis:
• Calculate the affordability gap per unit, based on the average affordable revenue and the total cost of producing a unit;
• Multiply this gap by the required number of affordable units in the project , using the percentages identified in the sensitivity analysis; and • Divide this value by the total habitable square foot of the project as a whole.

The affordability gap per unit for an affordable housing policy that requires a mix of low and moderate- income ownership units is much larger than the gap for a policy that only requires moderate units. The results shown in Figure 33 correspond to the require d percentages from the policy alternatives and sensitivity analysis results. With a 17 percent inclusionary requirement for only moderate -income units, the affordability-gap based in-lieu fee for single-family and townhome projects would be $32 per square foot and $9 per square foot, respectively. With a 12 percent requirement and a 50/50 split between low and moderate-income units, the affordability gap per square foot would be $29 per square foot and $17 per square foot, respectively.

Hayward Affordable Housing Ordinance Study 39 FIGURE 33: AFFORDABILITY GAP AND EQUIVALENT IN-LIEU FEES – OWNERSHIP PRODUCTS

Prototype 1: Single
Family Development
Prototype 2:

Townhomes
Prototype 3:

Condos
Affordability Gap per Unit
With 50/50 Low & Moderate Units $629,182 $238,960 $157,813 With Only Moderate Units $481,415 $89,787 $29,558
Affordability Gap per SF of Habitable Space, for
Each % Inclusionary Req.

With 50/50 Low & Moderate Units $2.44 $1.41 $1.75
With Only Moderate Units $1.87 $0.53 $0.33
In-Lieu Fee per SF With Only Moderate Units
At 7.5% Inclusionary Req. $14.09 $4.00 $2.48
At 17% Inclusionary Req. $31.72 $9.01 $5.58
In-Lieu Fee per SF With 50/50 Low & Moderate
Units
At 12% Inclusionary Req. $29.26 $16.92 $21.04
Source: Strategic Economics, 2022.

AFFORDABILITY GAP AND IN-LIEU FEE CALCULATIONS FOR RENTAL UNITS The total revenue that will be generated for each affordable rental unit in an off -site project is based on the amount of debt that could be supported annually from an affordable rent. This calculation is shown in Figure 34. The supportable debt per unit is calculated in three steps:
• Calculate the annual revenue for each unit, based on the maximum affordable rent corresponding to the required affordable income level;
• Calculate the net operating income for each unit, by subtracting the operating costs identified in the market-rate feasibility model; and
• Calculate the supportable debt that this level of annual net operating income could support, by assuming it is the annual payment on a 30 -year loan with a six -percent interest rate and

1.15 debt coverage ratio.

Hayward Affordable Housing Ordinance Study 40 FIGURE 34: SUPPORTABLE DEBT PER UNIT – RENTAL PROTOTYPES

Prototype 4:

Small
Multifamily
Prototype 5:

Stacked Flats
Prototype 6:
5-Story Wrap
Prototype 7: 5-
Story Podium
(TOD)
Annual Revenue per Affordable Unit
Very Low $15,093 $15,157 $14,245 $14,822
Low $18,798 $18,873 $17,673 $18,424
Moderate $37,325 $37,455 $34,808 $36,435
50/50 Split, Very Low & Low Units $16,946 $17,015 $15,959 $16,623 Net Operating Income per Affordable
Unit $3,786 $4,500 $4,790 $4,122
Supportable Debt per Affordable Unit $45,322 $53,866 $57,331 $49,334 Source: Strategic Economics, 2022.

Notes: Net Operating Income assumes 5% vacancy and equivalent operating costs to market-rate units of the same type.

Supportable Debt calculation assumes 30-year term and a 6% interest rate, with a 1.15 Debt Coverage Ratio.

The affordability gap and equivalent in-lieu fees for the rental prototypes were calculated using a six percent moderate-income requirement. Figure 35 compares the supportable debt per unit of rental prototypes with their total development costs to identify the total affordability gap per unit and evaluate how this gap translates to potential in-lieu fee levels per square foot of residential area in each project.

The calculation assumed that inclusionary requirements for rental housing do not change from the existing AHO requirements. When compared to the total development costs of each unit, the affordability gap per unit for rental projects in Hayward is very large compared to ownership housing projects, but in-lieu fees per square foot are only slightly larger. The in-lieu fee per square foot based on the affordability gap ranges from $29 for small multifamily to $41 for the five -story podium prototype.

FIGURE 35: AFFORDABILITY GAP PER UNIT, AND EQUIVALENT IN-LIEU FEE PER SQUARE FOOT OF PROJECT

Prototype 4: Small
Multifamily
Prototype 5:

Stacked Flats
Prototype 6: 5-
Story Wrap
Prototype 7: 5-Story
Podium (TOD)
Supportable Debt per
Affordable Unit $45,322 $53,866 $57,331 $49,334
Costs
Land Costs per Unit, Tier 1 $81,675 $66,223 $43,560 $51,368 Development Costs per Unit,
Excluding Land $420,491 $458,096 $484,014 $609,622
Total Development Costs $502,166 $524,319 $527,574 $660,990 Affordability Gap per Unit $456,844 $470,453 $470,243 $611,657 In-Lieu Fee per SF, for each
% Req. $4.81 $5.23 $5.88 $6.80
In-Lieu Fee per SF, 6% Req. $28.85 $31.36 $35.27 $40.78 Source: Strategic Economics, 2022.

Hayward Affordable Housing Ordinance Study 41

PEER CITY IN-LIEU FEE REQUIREMENTS
Like other municipal fees, the level of in -lieu fee set by a jurisdiction can play a part in influencing where market-rate developers decide to pursue new development projects. In order to construct a realistic comparison of Hayward’s in-lieu fees with requirements in nearby communities, Strategic Economics applied the in -lieu fee structure of each “peer community” to each of the seven development prototypes.

Hayward’s current in-lieu fees are relatively on par with the peer communities, though this varies by product type. Figure 36 shows the in-lieu fee that would be required for each prototype in Hayward and each of its “peer” communities . The maximum current fee level for each prototype is shown in bold. The key findings from this analysis were as follows:
• For ownership prototypes, Hayward’s current in -lieu fee would approximately represent the median value among the seven current fee levels. This shows that there is some room for increase in Hayward’s ownership fees without exceeding the levels of its peers.

• However, Hayward’s rental in-lieu fees are already closer to the maximum fees within the peer communities. This implies that there is not as much room to increase Hayward’s rental in-lieu fees as there is for ownership housing products.

FIGURE 36: IN-LIEU FEES OR AFFORDABLE HOUSING IMPACT FEES IN HAYWARD (CURRENT AHO) AND PEER

COMMUNITIES, APPLIED TO HAYWARD PROTOTYPES

Single Family
Development Townhomes Condos
Small
Multifamily
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Hayward $21.64 $21.64 $17.85 $21.64 $21.64 $21.64 $21.64 Concord $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 El Cerrito $22.88 $22.88 $22.88 $18.72 $18.72 $18.72 $18.72 Fremont
(current) $44.00 $44.00 $27.00 $16.19 $16.19 $14.88 $16.19 Fremont (old) $26.00 $27.00 $27.00 $27.00 $27.00 $27.00 $27.00 Newark $15.51 $18.49 $24.02 $23.58 $24.02 $24.22 $23.66 Richmond $10.50 $12.95 $21.88 $20.59 $21.88 $25.45 $30.33 Union City $27.00 $27.00 $27.00 $27.00 $27.00 $27.00 $27.00 Maximum Fee $44.00 $44.00 $27.00 $27.00 $27.00 $27.00 $30.33 Median Fee $22.26 $22.26 $23.45 $21.12 $21.76 $22.93 $22.65 Source: Municipal Ordinances, 2022; Strategic Economics, 2022.

Note: Estimates in-lieu fee for each prototype under each City’s policies, using the project assumptions.

Hayward Affordable Housing Ordinance Study 42

SUMMARY OF POLICY DIRECTION AND ROLE OF

THE AHO IN ADDRESSING DISPLACEMENT
The recommended revisions to the AHO incorporate community input, technical feedback, decisionmaker input, and previously completed displacement analysis findings , in addition to the findings of the feasibility and affordability gap analyses. This section summ arizes these sources of input and how the AHO analysis and recommendations incorporate this input . Strategic Economics and City of Hayward staff obtained feedback from a variety of stakeholders and City leaders throughout the analysis process. Engagements included a presentation of results to the City’s Homelessness - Housing Task Force; a hearing with the City of Hayward Planning Commission; community input from two Fair Housing Workshops and a Housing Fair; and input from developers via two Technical Advisory Committee meetings. A total of 18 community members provided input during the community workshops, while five locally active and knowledgeable developers served on the Technical Advisory Committee.

HOMELESSNESS-HOUSING TASK FORCE
After viewing preliminary feasibility analysis results, the City of Hayward’s Homelessness-Housing Task Force (HHTF) issued the following policy recommendations:
• Maintain the existing rental inclusionary requirement; • Maintain relatively lower inclusionary requirements for high -density ownership housing products;
• Increase inclusionary requirements for single -family homes and townhomes while still accommodating potential short-term changes in development conditions; and • General preference that projects provide on-site inclusionary units rather than pay in-lieu fees, especially for projects with 20 or more housing units.

These recommendations reflect the feasibility analysis findings that rental projects are currently not feasible with existing AHO requirements, but that single fam ily and townhome products could accommodate a substantial increase in inclusionary requirements. The HHTF recommended that requirements for these ownership products should increase, but also encouraged Strategic Economics to anticipate potential shifts in development feasibility due to changing costs and revenues.

These recommendations were used to determine which policy alternatives to analyze as well as informing recommendations for in -lieu fees. Based on this guidance, Strategic Economics further analyzed changes to inclusionary requirements for ownership products . Strategic Economics also developed new in-lieu fee recommendations intended to provide flexibility for development projects to meet the AHO’s requirements while still encouraging provision of on-site inclusionary units.

INPUT FROM COMMUNITY WORKSHOPS
Community members expressed that their top priorities were ownership housing, providing housing affordable to middle-income households, and providing housing affordable to extremely low-income households. A total of 18 community members provided input over the course of two fair housing workshops and a housing fair. Respondents selected their top housing priorities from a list of ten options. Community priorities were diverse, but the top overall priorities were as follows:
• Prioritize ownership housing

Hayward Affordable Housing Ordinance Study 43 • Prioritize middle-income households ($171,350 annual income for 4-person household) • Prioritize extremely low-income households ($42,850 annual income for 4-person household) • Prioritize mixed income housing within new developments • Prioritize rental housing
These recommendations suggest two primary uses of the inclusionary policy . First, it is important to optimize the use of the inclusionary housing policy to maintain feasibility for ownership products that would provide on -site units for moderate -income households. Second, it is important to use the inclusionary policy to generate in -lieu fee revenue that can be used to produce rental housin g units that are affordable to extremely low -income households, given that housing at this affordability level requires additional outside subsidies beyond what can typically be supported through an inclusionary requirement.

TECHNICAL ADVISORY COMMITTEE
Input from the Technical Advisory Committee (TAC) was used to validate the feasibility analysis results and ensure that final recommendations for inclusionary requirements would be productive for maximizing affordable housing construction in Hayward . During the first TAC meeting, these locally knowledgeable developers of single family and multifamily projects provided the following key points of emphasis:
• Confirmed the basic assumptions and inputs applied in the feasibility analyses; • Confirmed analysis findings that single -family homes are currently more financially feasible than multifamily developments in Hayward;
• Discussed trade-offs between the use of in-lieu fees versus providing on-site units, expressing that flexibility is necessary to en sure different projects can be delivered under different circumstances while still delivering affordable housing units or funding.

Tradeoffs between in-lieu fees and on-site inclusionary units were also a subject of discussion at the second TAC meeting. At this second meeting developers emphasized the following points:
• Flexibility is important to them for being able to figure out how to make a particular project financially feasible;
• Fees and affordable housing requirements get passed on to the residents paying market-rate costs, since these requirements necessitate higher prices and rents to achieve project feasibility;
• Construction costs are currently rising rapidly, by as much as ten percent per year; and • The AHO should allow affordable housing developers to apply rent and income limits matching those of the Federal Low-Income Housing Tax Credit program.

Based on this feedback, Strategic Economics conducted additional sensitivity analysis of the impacts of increased construction costs on the ownership prot otypes’ abilities to support increased inclusionary requirements and incorporated additional analysis of development cost burdens into the in-lieu fee recommendations.

CITY OF HAYWARD PLANNING COMMISSION
Members of the City of Hayward Planning Commission raised concerns about ensuring development feasibility as conditions change and noted preferences for developers to provide on -site inclusionary housing units rather than in -lieu fees. Strategic Economics and City staff shared the analysis results

Hayward Affordable Housing Ordinance Study 44 and this report’s recommendations as an informational item at the Planning Commission’s December 8, 2022 public meeting. The Planning Commissioners primarily asked questions about the analyses and the basis of the recommend ed revisions to the AHO’s inclusionary re quirements. Areas of focus for other comments and questions included:
• Concerns about maintaining development feasibility as conditions change; • Concerns about the infeasibility of higher density market-rate rental housing; • Potential uses of the in-lieu fee revenue; and
• Preference that developers provide on-site inclusionary units rather than in-lieu fee revenue.

AHO Policy Support for Preventing Displacement
A recently completed displacement analysis for the City of Hayward found that that there is significant need for very low-income housing in Hayward, and that on-site inclusionary housing alone will not meet the City’s affordable housing needs. 6 In 2021, HR&A Advisors completed a displacement study analyzing trends in housing costs and residen tial displacement within Hayward. This study identified that rents and home values have been outpacing housing growth; housing production has not kept pace with jobs; homelessness is increasing; and low -income residents are likely undergoing displacement.7 The AHO update was undertaken in part to examine how policy modifications could contribute toward addressing these displacement concerns by providing additional affordable housing units and housing units at a deeper level of affordability.

AHO policy modifications can address displacement by prioritizing housing for low -income and very low-income households in Hayward and generating in-lieu fees t hat can be leveraged to generate relatively greater numbers of affordable housing units at deeper levels of af fordability. Based on findings from the feasibility and affordability gap analyses, the A HO can support displacement prevention by modifying the income requirements for ownership housing to include low -income households (in addition to moderate-income households) and by retaining the option for developers to pay in-lieu fees instead of building on-site units. The low-income requirement will serve households at greater risk of displacement. The in -lieu fees create an opportunity for the City to partner w ith affordable housing developers to leverage outside funding sources such as Federal Low Income Housing Tax Credits (LIHTC) and provide more affordable housing units at a deeper level of affordability than inclusionary requirements alone could achieve.

AHO UPDATE RECOMMENDATIONS

INCLUSIONARY POLICY RECOMMENDATIONS
Strategic Economics recommends maintaining current inclusionary requirements for rental products and high -density ownership products, while increasing the required inclusionary percentage and deepening affordability requirements for low -density ownership products. The recommendation for

6 City of Hayward Assistant City Man ager. (2022). Staff Report on Implementation of the Existing Affordable Housing Ordinance and Next Steps for Potential Modifications to the Ordinance. 7 HR&A Advisors. (2021). City of Hayward Displacement Study.

Hayward Affordable Housing Ordinance Study 45 ownership projects that are less than 35 dwelling units per acres is to increase the required total inclusionary percentage from ten percent to 12 percent, split evenly between low-income households and moderate-income households. This is a departure from the current policy, which only requires that ownership projects provide affordable units for moderate -income households. Recommended changes are summarized in Figure 37.

FIGURE 37: RECOMMENDED CHANGES TO INCLUSIONARY REQUIREMENTS

These recommendations were informed by the following analysis and community input findings:
• The majority of the analyzed rental housing prototypes are currently not feasible within Hayward, regardless of the level of AHO requirements or submarket “tier.” This aligns with current development conditions, as developers have not proposed any major ma rket-rate rental projects since adoption of the Hayward’s current AHO requirements. Reduction or elimination of affordable housing requirements is not expected to significantly improve feasibility for these multifamily products due to their wide gap between achievable revenues and construction costs.

• The recommended requirements are within a typical range of seven “peer” cities for which Strategic Economics reviewed inclusionary policies and affordable housing production outcomes.

o As shown in the Existing AHO and Comparison to Peer Cities analysis on page 14, Hayward’s curren t inclusionary requirements are relatively lower than peer communities, yet these low requirements led to production of a relatively high number of affordable low - and moderate -income housing units. Inclusionary requirements should be set at a level that does not encourage developers to build projects in nearby communities instead of Hayward. Inclusionary on -site units we re also the primary means by which Hayward and peer communities produce deed-restricted housing for moderate-income households.

Current Requirements
•Rental
•3% very low-income
•3% low-income
•Ownership: <35
du/acre
•10% moderate-
income
•Ownership: >35
du/acre
•7.5% moderate-
income
Recommendations
•Rental
•3% very low-income
•3% low-income
•Ownership: <35
du/acre
•6% low-income
•6% moderate-income
•Ownership: >35
du/acre
•7.5% moderate-
income

Hayward Affordable Housing Ordinance Study 46 • The peer cities analysis also suggested the importance of maintaining inclusionary requirements at a level that supports the financial feasibility of new development. o Some jurisdictions, such as Fremont, may be able to sustain higher inclusionary requirements because they have higher market-rate rents that could support the cost of affordable units.

o In Hayward, the Inclusionary Policy Alternatives Findings on page 35 indicate that single-family homes and townhomes are only marginally feasible at a 15 percent requirement—the level used by some peer communities.

• The HHTF expressed a pr eference for maintaining existing rental requirements to ensure developers are obligated to provide inclusionary or in -lieu fee contributions if development conditions improve in the future.

• A condominium prototype (a higher-density ownership product) is not currently feasible under any market tier within Hayward, and developers are not proposing condominiums in Hayward.

• Strategic Economics found through sensitivity testing that a 12 percent requirement for low and moderate-income households applicable to low-density ownership products (single-family homes and townhomes) would allow projects to maintain feasibility while also sustaining increases in construction costs of up to four percent. In contrast, a higher required percentage would result in these pr ojects becoming infeasible with the slightest negative change in development conditions. See the Sensitivity Analysis section on page 36 for further details.

• The HHTF expressed a preference for increasing ownership requirements, but not to such a point that they block housing development if project costs and revenues shift in the near term.

IN-LIEU FEE RECOMMENDATIONS
Strategic Economics recommends maintaining the current level of in-lieu fees for rental products and high-density ownership products, while increasing the fee for low -density ownership products to $26 per habitable square foot. The goal of these recommendations is to strike a balance between generating revenue for producing affordable units while ensuring that the fee does not prevent development activity. The recommended changes represent a relatively small increase in total development costs.

Hayward Affordable Housing Ordinance Study 47 FIGURE 38: IN-LIEU FEE RECOMMENDATIONS

These recommendations were informed by the following feasibility analysis and community input findings:
• The affordability gap analysis found that the in-lieu fee amount required to build off-site deed- restricted affordable housing equivalent to the revised inclusionary requirements would be $29.26 per square foot for single-family homes and $16.92 per square foot for townhomes.

• Among other considerations, in -lieu fees should be set at a level that does not encourage developers to build projects in nearby c ommunities instead of Hayward. The maximum effective in-lieu fee for ownership products among Hayward’s “peer” communities is $44 per square foot of habitable space, but the median fee is closer to Hayward’s current level.

• The maximum in-lieu fee for rental products among Hayward’s peer communities is approximately $30 per square foot, while the median fee is close to Hayward’s current level. o Based on the affordability gap, the in -lieu fee for rental products would be between $29 per square foot and $40 per square foot.
o However, rental products are largely not feasible under existing AHO requirements; maintaining a lower in -lieu fee for rental projects increases the possibility of development occurring if conditions improve in the future.

• The HHTF supported increasing AHO requirements on low -density ownership products while maintaining consistent requirements for high-density ownership housing and rental products.

• Analysis of affordable housing funding data for Hayward and Fremont demonstrated the importance of i n-lieu fee revenues as a local funding source for production of 100 percent affordable housing projects. These projects can provide a deeper level of affordability than what can be achieved through inclusionary units. These projects can also provide permanent supportive housing units and housing units for extremely low -income households —serving community members who are at high risk for displacement or homelessness.

• Lastly, TAC members noted that financial considerations for in-lieu fees or provision of on-site units differ from project to project, and that flexibility is important for ensuring that they can find a feasible approach for future projects.

Hayward Affordable Housing Ordinance Study 48 APPENDIX A: GLOSSARY OF KEY TERMS
Definitions from Current AHO
• "Affordable Unit" is defined as an ownership or rental Dwelling Unit whose price is set at an Affordable Ownership Cost or Affordable Rent as defined in this Article. • "Affordable Ownership Cost" is defined as the maximum purchase price that will be affordable to a Moderate-Income Household at Presumed Occupancy Levels, based on a reasonable down payment and monthly housing payments (including mortgage principal and interest, property taxes, homeowner's insurance, and homeowner/condominium association fees where applicable) that do not exceed one hundred ten percent of Area Median Income multiplied by thirty-five percent and divided by twelve.
• "Affordable Rent" is defined as the maximum monthly rent, including all fees for housing services and a utility allowance as determined by the Alameda County Housing Authority, that does not exceed the following, based on Presumed Occupancy Levels:
o For Extremely Low Income Households: thirty percent of Area Median Income multiplied by thirty percent and divided by twelve.
o For Very Low Income Households: fifty percent of Area Median Income multiplied by thirty percent and divided by twelve.
o For Low Income Households: sixty percent of Area Median Income multiplied by thirty percent and divided by twelve.
• "Area Median Income (AMI)" is defined as the median income for Alameda County, adjusted for household size, as published annually in Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development (HCD).
• "Dwelling Unit" is defined as a dwelling designed and intended for residential occupancy by one household.
• "Extremely Low, Very Low, Low, and Moderate-Income Households" are defined as households whose incomes do not exceed the extremely low, very low, low, or moderate-income limits, as applicable, established for Alameda County and adjusted for household size that are published annually in Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by HCD.
• "Household Income" is defined as the gross annual household income, monetary benefits, and all other sources of household income, before deductions or exemptions, and includes the income of all members of the household 18 years of age or older. • "Ownership Residential Project" is defined as any Residential Development Project that creates new Dwelling Units that may be sold individually, including but not limited to condominiums, townhomes, stock cooperatives, community apartments, and attached or detached single-family homes. An Ownership Residential Project also includes any Residential Development Project with a recorded condominium plan or map and the conversion of residential property to common interest developments as described in Hayward Municipal Code Section 10-3.370. • "Presumed Occupancy Levels" as listed below shall be used to establish Affordable Ownership Cost and Affordable Rents, unless the Residential Development Project is financed with federal tax credits, in which case the applicable federal regulations shall determine the Presumed Occupancy Levels:
o One person for a studio unit;

Hayward Affordable Housing Ordinance Study 49 o Two people for a one bedroom unit;
o Three people for a two bedroom unit; and
o One additional person for each additional bedroom thereafter. • "Rental Residential Project" is defined as any Residential Development Project that creates new Dwelling Units that cannot be sold individually.

Definitions of Other Key Terms

INCLUSIONARY HOUSING POLICY TERMS
• “Affordability Gap” is defined as the difference between the revenue generated from each affordable unit and the total cost of developing those units. a. For ownership housing prod ucts, the affordability gap is the difference between the affordable sales price of a home and the total development cost of each unit. b. For rental products, the affordability gap is based on the difference between the total debt that can be supported from affordable rental revenue and the total development cost of each unit.
• “Inclusionary Requirement,” or “Inclusionary Percentage,” as used in this report, refers to the percentage of a project’s housing units that are required to be set aside as deed-restricted affordable housing at specific affordability levels.
• “In-Lieu Fee” is defined as a set fee, assessed per square foot of habitable space in a residential project, that c an be paid to substitute for some or all of the required affordable units in a housing project.

DEVELOPMENT FEASIBILITY TERMS
• “Hard Costs” include materials and labor associated with physical construction of the building. • “Investment Return” consists of the required financial return on investment that a project must achieve to attract developer and lender investment.
• “Land Costs” refer to the price the developer pays to acquire the land. • “Residual Land Value” represents the value remaining to pay for land after accounting for all other project costs, expected revenues, and required investment return. a. This value is compared to prevailing site acquisition costs for each prototype to evaluate project feasibility.
• “Soft Costs” include indirect expenses such as architecture and engineering, taxes, insurance, financing costs, and municipal fees.
• “Total Project Revenue” is determined by the market value of the project. a. For for -sale projects, the market value consists of achievable sales prices for the housing units.
b. For rental projects, the market value of the project depends on the annual revenue it will generate and the current capitalization rate, which reflects overall project investment risk relative to alternative investments.

Hayward Affordable Housing Ordinance Study 50 APPENDIX B: FEASIBILITY ANALYSIS DETAILS
Feasibility Assumptions
FIGURE 39: SQUARE FEET PER UNIT AND SHARE OF UNITS BY BEDROOM SIZE ASSUMPTIONS

Single Family
Development Townhomes Condos
Small
Multifamily
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Unit Size (sq. ft.)
Studio - - 600 600 600 580 575
1-BD - - 750 800 750 800 800
2-BD 1,600 1,450 950 1,000 950 1,000 1,000
3-BD 1,980 1,650 1,200 1,300 1,200 1,325 1,350
4-BD 2,500 1,900 - - - - -
5-BD 3,245 - - - - - -
Unit Share
Studio - - 11 4 11 90 25
1-BD - - 13 3 13 135 68
2-BD - 16 39 9 39 60 42
3-BD 9 58 11 4 11 15 24
4-BD 24 32 - - - - -
5-BD 11 - - - - - -
Total 44 106 74 20 74 300 159

FIGURE 40: MULTIFAMILY AND RETAIL RENT AND REVENUE ASSUMPTIONS Units Apartments Retail
Operating Expenses % of Gross Revenue 30% 0%
Vacancy Rate % of Gross Revenue 5% 10%
Cap Rate Net Operating Income / Total Capitalized Value 4.1% 4.1% Sources: Strategic Economics, 2022; Developer Interviews, 2022; Lee & Associates, 2022.

Notes: Operating Expenses are assumed to be negligible for retail because rent is expressed as triple-net. Under a triple net lease (NNN) the tenant pays operating expenses, including real estate taxes, building insurance, and maintenance (the three "nets") on the property in addition to the rents.

FIGURE 41: FINANCING COST CALCULATIONS, BY PROTOTYPE (IN MILLIONS OF DOLLARS)

Single
Family
Town-
homes Condos
Small
Multifamily
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Total Development Cost (Excl. Financing) $39.3 $61.1 $35.6 $9.1 $35.6 $147.2 $97.9 Amount Financed $27.5 $42.8 $23.1 $5.9 $23.2 $88.3 $58.8 Average Outstanding Balance $15.1 $23.5 $12.7 $3.3 $12.7 $48.6 $32.3 Construction Loan Fee $0.4 $0.6 $0.3 $0.1 $0.3 $1.3 $0.9 Cost of Interest $1.1 $1.8 $1.0 $0.2 $1.0 $4.9 $3.2
Total Cost of Financing $1.5 $2.4 $1.3 $0.3 $1.3 $6.2 $4.1 Financing Cost as Share of TDC 3.9% 3.9% 3.7% 3.7% 3.7% 4.2% 4.2% Source: Strategic Economics, 2022; Developer Interviews, 2022.

Hayward Affordable Housing Ordinance Study 51 Pro Forma Results
FIGURE 42: TIER TWO FULL PRO FORMA RESULTS - WITH CURRENT AHO REQUIREMENTS (IN MILLIONS OF DOLLARS)

Single
Family
Town-
homes Condos Small MF
Stacked
Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Revenues
For-Sale Revenue
Gross Revenue $56.5 $83.8 $33.5
Less Marketing Costs -$2.4 -$3.5 -$1.3
Net Sales Revenue $54.1 $80.3 $32.2
Rental Revenue
Gross Income, Residential $0.7 $2.4 $8.7 $5.2
Gross Income, Retail $0.2
Less Vacancy & Operating Costs -$0.2 -$0.9 -$3.1 -$1.9 Net Operating Income $0.4 $1.5 $5.6 $3.3
Total Capitalized Value $10.7 $37.8 $140.2 $80.9

Development Costs
Hard Costs
Site Prep, Demo $5.4 $5.4 $1.6 $0.5 $1.6 $4.4 $2.7
Vertical Hard Costs $17.0 $33.2 $23.7 $5.8 $23.7 $105.9 $71.6 Tenant Improvement Allowance $0.5
Soft Costs
Hard Cost Contingency $1.1 $1.9 $1.3 $0.3 $1.3 $5.5 $3.7 Arch., Eng., and Other Soft Costs $3.1 $5.4 $3.5 $0.9 $3.5 $15.5 $10.4 Municipal Fees, with AHO fees $2.8 $5.3 $2.6 $0.6 $2.7 $7.9 $4.7 Financing Costs $1.2 $2.0 $1.2 $0.3 $1.2 $5.8 $3.9
Total Development Costs $30.8 $53.3 $33.9 $8.5 $34.0 $145.6 $97.0

Feasibility Summary
Total Market Value of Project $54.1 $80.3 $32.2 $10.7 $37.8 $140.2 $80.9 Minimum Return on Cost 20% 20% 20% 20% 20% 20% 20%
Total Supportable Value $45.1 $67.0 $26.8 $8.9 $31.5 $116.8 $67.4 Less Development Costs -$30.8 -$53.3 -$33.9 -$8.5 -$34.0 -$145.6 -$97.0 Residual Land Value of Project $14.4 $13.6 -$7.1 $0.5 -$2.5 -$28.7 -$29.6 Typical Site Acquisition Cost $9.8 $9.8 $2.9 $1.0 $2.9 $7.8 $4.9 RLV Less Typical Acquisition Cost $4.6 $3.8 -$10.0 -$0.5 -$5.5 -$36.6 -$34.5 Source: Strategic Economics, 2022.

Notes:

Gross Income and Revenue Includes BMR Units.

Municipal fees shown here are slightly different from municipal fees shown in the rest of the report, because inclusionary units are exempt from some fees. In addition, in-lieu fees were required for some prototypes, even with on- site units, in order to account for fractional units.

Hayward Affordable Housing Ordinance Study 52 FIGURE 43: TIER ONE FULL PRO FORMA RESULTS WITH RECOMMENDED CHANGES TO AHO: MAINTAINING CURRENT REQUIREMENTS FOR CONDOS AND RENTAL PRODUCTS; REQUIRING 6% LOW AND 6% MOD. UNITS FOR SF AND TH

PRODUCTS (IN MILLIONS OF DOLLARS)

Single
Family
Town-
homes Condos Small MF Stacked Flats
5-Story
Wrap
5-Story
Podium
(TOD)
Revenues

For-Sale Revenue
Gross Revenue $62.4 $89.5 $40.7
Less Marketing Costs -$2.7 -$3.8 -$1.6
Net Sales Revenue $59.7 $85.7 $39.0
Rental Revenue
Gross Income, Residential $0.8 $2.8 $10.0 $6.0
Gross Income, Retail $0.2
Less Vacancy & Operating Costs -$0.3 -$1.0 -$3.6 -$2.2 Net Operating Income $0.5 $1.8 $6.6 $3.8
Total Capitalized Value $12.4 $43.6 $161.0 $93.4
Development Costs
Hard Costs
Site Prep, Demo $5.4 $5.4 $1.6 $0.5 $1.6 $4.4 $2.7
Vertical Hard Costs $17.0 $33.2 $23.7 $5.8 $23.7 $105.9 $71.6 Tenant Improvement Allowance $0.0 $0.0 $0.0 $0.0 $0.0 $0.5 $0.0 Soft Costs
Hard Cost Contingency $1.1 $1.9 $1.3 $0.3 $1.3 $5.5 $3.7 Arch., Eng., and Other Soft Costs $3.1 $5.4 $3.5 $0.9 $3.5 $15.5 $10.4 Municipal Fees, with AHO $2.8 $5.1 $2.6 $0.6 $2.7 $7.9 $4.7 Financing Costs $1.2 $2.0 $1.2 $0.3 $1.2 $5.8 $3.9
Total Development Costs $30.7 $53.1 $33.9 $8.5 $34.0 $145.6 $97.0 Feasibility Summary
Total Market Value of Project $59.7 $85.7 $39.0 $12.4 $43.6 $161.0 $93.4 Minimum Return on Cost 20% 20% 20% 20% 20% 20% 20%
Total Supportable Value of Project $49.7 $71.4 $32.5 $10.3 $36.3 $134.2 $77.8 Less Development Costs -$30.7 -$53.1 -$33.9 -$8.5 -$34.0 -$145.6 -$97.0 Residual Land Value of Project $19.1 $18.3 -$1.4 $1.9 $2.3 -$11.4 -$19.2 Typical Site Acquisition Cost $16.3 $16.3 $4.9 $1.6 $4.9 $13.1 $8.2 RLV Less Typical Acquisition Cost $2.7 $1.9 -$6.3 $0.2 -$2.6 -$24.5 -$27.4 Source: Strategic Economics, 2022.

Notes:

Gross Income and Revenue Includes BMR Units.

Municipal fees shown here are slightly different from municipal fees shown in the rest of the report, because inclusionary units are exempt from some fees. In addition, in-lieu fees were required for some prototypes, even with on-site units, in order to account for fractional units.

CITY OF HAYWARD
Hayward City Hall
777 B Street
Hayward, CA 94541
www.Hayward-CA.gov
File #: LB 23-012
DATE: March 28, 2023
TO: Mayor and City Council
FROM: Acting Director of Development Services

SUBJECT
General Plan Annual Progress Report: Accept the Hayward 2040 General Plan Annual Progress Report for Calendar Year 2022

RECOMMENDATION
That the Council accepts the City of Hayward 2040 General Plan Progress Report for the 2022 Calendar Year and provides feedback and direction as desired.

SUMMARY
In 2014, the Council adopted a new General Plan for the City of Hayward. Government Code Section 65400 et seq. requires the City to annually review the General Plan and report progress on the programs contained therein. This annual report has been prepared for review and acceptance by the Council and will be forwarded to the State Office of Planning and Research and the State Housing and Community Development office to ensure compliance with State guidelines.

The Hayward 2040 General Plan is a long-range comprehensive plan that controls and regulates land uses and development in the City through 2040. The individual elements of this General Plan (Land Use, Mobility, Economic Development, Community Safety, Natural Resources, Hazards, Education, Community Health, Facilities/Services and Housing) contain policies and programs that guide future development in the City.

This General Plan Annual Progress Report was prepared by the Development Services Department- Planning Division, with input from various City Departments including Public Works and Utilities, Fire, Police, Library Services, Maintenance Services, and the City Manager’s Office. This report is intended to provide information on the measurable outcomes and actions associated with the implementation of all General Plan elements.

On February 23rd, this progress report was presented as an informational item to the Planning Commission. The Commissioners received the annual report and provided additional comments and recommendations to staff. A summary of the comments is included in the Discussion section of this CITY OF HAYWARD Printed on 3/24/2023Page 1 of 2
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File #:LB 23-012
report.

ATTACHMENTS
Attachment I Staff Report
Attachment II General Plan Program List
Attachment III Housing Element Review of Past Accomplishments CITY OF HAYWARD Printed on 3/24/2023Page 2 of 2
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Page 1 of 11 ends

Hayward City CouncilMarch 28, 2023

Hayward City Council
March 28, 2023