Presented By: RSG
Hypothetical Development:
Partial On-Site Production and
Partial In-Lieu Fee Payment
Presented By: RSG
PARTIAL ON-SITE PRODUCTION, AND
PARTIAL IN-LIEU FEE PAYMENT
1. Some developers may find that moderate income units
are feasible to build on site, but low- and very low-
income units are infeasible.
2. Rather than requiring either full on-site unit production, or full in-lieu fee payment, the City could offer
Developers the option of partial on-site unit production and partial in-lieu fee payment.
3. Developer builds moderate-income units on site
4. Developer pays in-lieu fee proportional to required low- and very-low unit production.
(Examples on following slides)
Presented By: RSG
PARTIAL ON-SITE PRODUCTION: SINGLE FAMILY
Fee based on 10% production
requirement and weighted by RHNA
obligations
Hypothetical Development:
100 Single Family Homes
1. Inclusionary Requirement for 100
Units @ 12.5% (1) (Rounded)
4 Moderate-income (100 x 12.5% x 30.0%)
4 Low-income (100 x 12.5% x 28.5%)
5 Very Low-income (100 x 12.5% x 41.5%)
2. Cost to Developer (2) ($364,000) per unit
3. Sales Revenue (3)
Moderate: $364,000 per unit
Low: $144,000 per unit
Very Low: $68,000 per unit
4. Feasibility Surplus/(Gap)
Moderate: $0
Low: ($220,000)
Very Low: ($296,000)
(1) Weighted according to RHNA obligations (41.5% very low, 28.5% low, and 30.0% moderate) (2) Hypothetical development cost inclusive of of land, construction costs, soft costs, contingencies, reserves, and developer profit, equivalent to the moderate-income unit value (3) Based on 2022 Affordable Owner Cost Limits for Merced County Presented By: RSG
PARTIAL ON-SITE PRODUCTION: SINGLE FAMILY
Fee based on 10% production requirement
and weighted by RHNA obligations
Hypothetical Development:
100 Single Family Homes
5. Maximum Supportable Fee @ 10% $18,500
6. Fee by Income Level (1)
(Rounded to nearest 100)
Moderate: $5,500
Low: $5,300
Very Low: $7,700
7. In-lieu Fee by Affordability Level (2)
Very Low Low
$7,700/unit $5,300/unit
$770,000 $530,000
8. Total Production and Fee 4 Moderate-income units
$1,300,000
(1) Weighted according to RHNA obligations (41.5% very low, 28.5% low, and 30.0% moderate) (2) Total Number of Units in Development x Fee by Income Level Presented By: RSG
PARTIAL ON-SITE PRODUCTION: MULTIFAMILY
Fee based on 10% production
requirement and weighted by RHNA
obligations
Hypothetical Development:
100 Multifamily Units
1. Inclusionary Requirement for
100 Units at 12.5% (1) (Rounded)
4 Moderate-income (100 x 12.5% x 30.0%)
4 Low-income units (100 x 12.5% x 28.5%)
5 Very Low-income units (100 x 12.5% x 41.5%)
2. Cost to Developer (2) ($337,000) per unit
3. Capitalized Unit Value (3)
Moderate: $198,000 per unit
Low: $52,000 per unit
Very Low: $23,000 per unit
4. Feasibility Surplus/(Gap)
Moderate: $134,000
Low: $285,000
Very Low: $315,000
(1) Weighted according to RHNA obligations (41.5% very low, 28.5% low, and 30.0% moderate) (2) Hypothetical development cost inclusive of of land, construction costs, soft costs, contingencies, reserves, and developer profit, equivalent to the moderate-income unit value (3) Based on 2022 Affordable Rental Housing Cost Limits for Merced County Presented By: RSG
PARTIAL ON-SITE PRODUCTION: MULTIFAMILY
Fee based on 10% production requirement
and weighted by RHNA obligations
Hypothetical Development:
100 Multifamily Units
5. Maximum Supportable Fee @ 10% $25,400
6. Fee by Income Level (1)
(Rounded to nearest $100)
Moderate: $7,700
Low: $7,200
Very Low: $10,500
7. In-Lieu Fee by Affordability Level (2)
Very Low Low
$10,500/unit $7,200/unit
$1,050,000 $720,000
8. Total Production and Fee 4 Moderate-income units
$1,770,000
(1) Hypothetical development cost inclusive of of land, construction costs, soft costs, contingencies, reserves, and developer profit, equivalent to the moderate-income unit value (2) Weighted according to RHNA obligations (41.5% very low, 28.5% low, and 30.0% moderate) Presented By: RSG
ANNEXATION AREAS
• One property sold in the annexation areas in
the last five years: 37.4-acre Baxter Ranch sold
in October 2021 for $1.8 million ($46,800 per
acre)
• Within the City:
• Land costs ranged from $100,000 to $1.3 million per acre • Median $297,000 per acre
• Outside the City’s corporate limits, but within
the City’s sphere of influence:
• Land costs ranged from $28,000 to $450,000 per acre
• Median $55,000 per acre
Presented By: RSG
SUPPORTABLE AND FEASIBLE IN-LIEU FEES
FOR THE CITY AND ANNEXATION AREAS
Based on Land Values within the City Based on Unincorporated Land Values (1) Maximum
Supportable
(10% Production Req)
Maximum
Feasible
Maximum
Supportable
(10% Production Req)
Maximum
Feasible
Single Family
Residential
$18,500 per unit
$11 per sf
$15,200 per unit
$9 per sf
$16,600 per unit
$10 per sf
$43,400 per unit
$26 per sf
Med Density
Multifamily
$25,400 per unit
$28 per sf
$23,000 per unit
$25 per sf
$24,600 per unit
$27 per sf
$33,200 per unit
$37 per sf
(1) Feasibility may be further impacted by higher entitlement and infrastructure costs in annexation areas.
Alternatives
Waive inclusionary requirements within
the City limits
Adjust fee based on area (North, South,
AB3312)
Waive or Reduce fee for In - Fill
Development
Policy only applies to new annexation
Allow developers to split the
requirement between building part
affordable and paying in - lieu of building
affordable housing