APPROVED AS TO FORM:
ACCOUNT DATA:
BY: --------------
verified by Finance Officer
{Signatures continued on next page}
X:\Agreements\Housing\2022\PSA - RSG Inc Re Affordable Housing Policy.docx
EXHIBIT A
SCOPE OF WORK
RSG is proposing the following tasks be undertaken. It should be noted that some of the tasks overlap to a certain degree.
Task 1 – Project Kickoff and Subsequent Meetings
RSG would coordinate an in-person or virtual kick-off meeting with City staff to review the scope of services and schedule of work and deliverables, as well as any special issues or considerations related to the local real estate market, affordable housing, public policy priorities, etc. We will also collect any data that may be helpful in the process.
RSG anticipates monthly virtual check-in meetings with staff to review progress, discuss the administrative draft of the study, and to prepare for Planning Commission and City Council meetings.
The results of the study will be presented in-person to the Planning Commission and City Council. RSG will present the findings, conclusions, and recommendations of the Study and answer questions from the members and public. RSG can attend a second City Council meeting if necessary.
The scope is estimating a total of four virtual meetings and up to four in-person meetings for Tasks 1 through 5.
Task 2 - Municipal Code Amendments and Affordable Housing Inclusionary Policy
This analysis includes evaluating the City’s current practices and policies governing the implementation of inclusionary housing. RSG would evaluate the Zoning Code and any other applicable local development requirements such as housing overlays or density bonus to provide recommendations to the City on amendments to the Municipal Code and the proposed Affordable Housing Inclusionary Policy. RSG can work with the City to see if there are any other City planning goals that could also be addressed in this process – such as workforce housing, transit priorities, or priority development areas in the community. This information will also be used to complete the inclusionary housing financial evaluation.
RSG would approach this task by initially reviewing Resolution 2022-15 and the interim RHNA Unit Production Plan adopted on April 4, 2022 and relevant Municipal Code sections affecting inclusionary zoning to better understand where in the community housing and inclusionary housing is allowed and currently being developed. We would work in conjunction with the City’s Planning Department to understand current impediments to residential development that may be a result of zoning regulations. Conversely, we would seek their input on specific policies that are effective in achieving the City’s goal of increasing the supply of both market-rate and affordable housing.
RSG would review the City’s RHNA requirements and Housing Element to best determine the thresholds of affordability and the percentage of inclusionary housing. We would also examine policies of nearby jurisdictions as a means of setting a benchmark and to ensure that policies implemented by the City do not deter development.
There are multiple alternatives in which a developer can comply with inclusionary housing requirements, such as an in-lieu fee or partial fees, land dedication, or purchase of
EXHIBIT A
covenants. RSG will examine these alternatives and offer suggestions for other alternatives that may fit the community’s needs.
Task 3 - Economic and Financial Feasibility
Based on the evaluation of the City’s existing programs and regulations, an economic and financial feasibility analysis of the proposed policy will be completed to determine if development of both market-rate and affordable residential units is feasible. It should be noted that this analysis may modify some of the items initially identified in the previous task.
The City’s interim policy requires a minimum of 12.5% affordable units in new multi-family residential developments with at last 36 units and single-family residential developments with at least 60 units (with some exceptions). As part of our comprehensive examination of the City’s inclusionary housing policies, we will evaluate the current requirements to determine if they are reasonable or need to be adjusted to meet legal parameters and the City’s goals. As part of this analysis, we will examine a maximum inclusionary percentage and alternate options including an in-lieu fee, land dedication, off-site construction, and acquisition and rehabilitation of existing housing units.
Task 4 – Inclusionary Housing State Trends and Fee Comparison with Neighboring Jurisdictions
It is important to understand both statewide and neighboring jurisdiction trends as relates inclusionary ordinances. RSG will research existing inclusionary housing programs in California that will serve as a baseline for reasonable and justifiable approaches to establishing the City’s policy (building on the City’s research presented in the staff report for Resolution 2022-15). This research may also provide insight on additional factors that may be considered as part of the financial and economic feasibility.
RSG will also compare the proposed in-lieu fees with those in neighboring and similar communities, to assess whether the proposed fees may serve to impede development opportunities in the City by making it less competitive with other cities.
Task 5 –Report on Affordable Housing Inclusionary Policy and In-Lieu Fees
The culmination of our research and analysis will result in a written document that details our findings and recommendations regarding the adoption of an Affordable Housing Inclusionary Policy and residential in-lieu fees. This will include an evaluation of the economic and financial impacts of the recommended policy and a written policy analysis addressing inclusionary housing and zoning. The report will include information on key court cases impacting inclusionary housing policy. It will provide an overview of State law regulating inclusionary housing policies and HCD’s role in the process.
The report will identify production requirements, in-lieu fees, and alternatives to the fee; the financial benefits, costs, and impacts; the process for annually adjusting an In-Lieu Fee Schedule; the process, assumptions, and process for adjusting maximum affordable rent and sale prices; and a draft of the recommended affordable housing policy.
RSG will prepare an Administrative Draft of its report on findings, methodology, fee recommendations for City staff review and comment. After incorporating comments, RSG will
EXHIBIT A
deliver a Final Report to be used as the basis for establishing inclusionary in-lieu fees and for the Planning Commission and City Council’s consideration. If needed, RSG will make any edits to the Report based on feedback from the presentations.
RSG will rely on the City’s legal counsel to review the policy and draft any related ordinances before adoption. Reports will be delivered using the Microsoft Office suite and/or Adobe PDF.
Task 6 – Prohousing Policy with Housing Trust Fund Guidelines
The City Council has authorized creating a local housing trust fund with $500,000 in starter funds. In-lieu fees generated by the new inclusionary housing policy will be deposited into the trust fund. The City wishes to draft a Prohousing Policy that creates guidelines on how to spend local housing trust funds. The Prohousing Policy should incorporate enhancement factors that help the City obtain a Prohousing Designation from HCD. RSG will collaborate with City staff to draft a Prohousing Policy that considers Merced’s housing needs and priorities. The policy will consider the City’s Housing Element, local demographics, land use constraints, and other factors as necessary. The Prohousing Policy will be drafted to increase points on the Prohousing Designation Program application as much as possible. RSG will kick-off and develop the Prohousing Policy concurrently with Tasks 1 to 5. However, we anticipate it will be finalized and completed after City Council has approved the Affordable Housing Inclusionary Policy. The fee estimate includes 1 additional virtual staff meeting and 1 in-person City Council meeting for Task 6.
EXHIBIT B
SCHEDULE
The following details the approximate timeline by week; this is an estimation and the schedule may vary depending on the availability of meeting dates and by mutual agreement. RSG will refine the schedule with City staff at the kick-off meeting.