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City Council Chambers
January 24, 2023
Background
• September 14., 2021 - Council Study Session
o Directed staff to study financial implications of
inclusionary housing
o Return with recommendation on percentage
• March 22, 2022 - Council Study Session
o Financial evaluation prepared- Keyser Marston
o Uncertainty with Housing Element Update
o Council consensus to delay until HE certification
What is "inclusionary" housing?
A local ordinance that requires a pre -determined share of new housing units be affordable to persons of very low-, low-, and/or moderate incomes
No Inclusionary Requirement
100 Market -Rate Units
No Affordable Units
10% Inclusionary Requirement
90 Market -Rate Base Units
10 Low -Income Units
Why discuss inclusionary!
Airport Area
Coyote Canyon
West Newport
Dover-Westcliff
Newport Center
ADUs, Pipeline,
and 51" Cycle
Totals
Very -Low,
Moderate
1,031
536
443
208
976
Total
2,577
1,530
1,107
521
2,439
Annual Production:
= 3,688 = 8 (years)
= 461 Affordable Units /Year
• City is committed to rezoning
to meet Regional Housing
Needs Allocation (RHNA) and
provide new housing
opportunities
1,989
• How do we promote
10,163 affordable development?
RHNA Fulfillment T
• Inclusionary housing can assist in fulfilling a
portion of RHNA
o Ensures portion of new housing opportunities
created include some component of affordable
o Disperse affordable housing throughout
community
• Adopted Housing Element Policy Action 1K
o Interim policy within 6 months of HE adoption
o Base inclusionary requirement of 15%
o Study and adopt ordinance within 36 months
RelationshipDensityto Bonus -
Developers can utilize Density Bonus law to boost density.
If a developer
does
not want
to use
Density
Bonus
law then
what
inclusionary
(%) requirement
would
the
City
would
impose?
State Density
City's Inclusionary
Bonus law OR Ordinance
• Boost in Density Framework
• Development Incentives . Types of projects
• Development Waivers . Minimum
In -lieu fee
• Reduced parking • Alternatives
© Optional Mandatory
ON
telationshiF to Density Bonus -
Density Bonus and
Inclusionary Housing can
work together
5 20
6 22.5
7 25
8 27.5
9 30
*Not eligible for density
10 32.5
bonus if in -lieu housing 11 35
fee paid to satisfy housing 12 38.75
requirements. 13 42.5
14 46.25
15 50
15 27.5
24 50
15 10
44 50
10% Inclusionary Requirement
90 Market -Rate Base Units
10 Low -Income Units
20 Market -Rate Density Bonus Units
Our Previous Ordind,
Applicability
of Affordable
Income Distribution
In -Lieu Option "$"
Alternatives
Other Notes
All for -sale projects
15%
15 % very -low, low-, or moderate -
incomes
$18,,500 increased to $28,954
Off -site construction, land
dedication, off -site conversion
Repealed in 2013
'--'
Financial Evaluation Pararnete- r s-'
:k#& w:
• Keyser Marston hired to perform a financial evaluation • Pro Forma analyses prepared of prototype residential
developments( www.newportbeachca.gov/inclusionary)
• Evaluation of housing opportunity areas
Airport Area
Banning
r Ranc
West
Newport : Do
Mesa Westcliff -'
N Coyote
Center A Canyon
WN
A. 7Y- i3
Pro Forma Evaluation Tests
cqi Fo RNP
• The requirement should balance the interest of
property owners and developers against the public
benefit created by the production of affordable
housing units.
• The legal standards are:
• The requirements cannot be confiscatory; and
• The requirements cannot deprive an owner of a fair and reasonable return on their investment.
,&ation Standards
Reduction in property values 25% max
Increase in market sales prices and rents 6% max
Supportable Requirem-A&
ent
Rental projects can support:
Inclusionary
Low Income Unit
In -Lieu Fee / Market -
Rate Unit
In -Lieu Fee / SF
Options for fee calculation:
• By geographical area
• Weighted average
• Lowest fee
Jr 0 V
$36,690
$38.30
$34,790
$60,990
$50.30
$37,660
$38.50
F_M
Supportable Requirement
Ownership projects can Support:
Inclusionary
Moderate Income Units
In -Lieu Fee / Market -
Rate Unit
In -Lieu Fee / SF
Options for fee calculation:
• By geographical area
• Weighted Average
• Lowest fee
2S% 8YO 5%
$59,720
$37.00
$86,450
$40.00
$218,420
$86.30
$70,820
$33.80
Southern California Examples
Irvine
Huntington
Beach
Long Beach
Carlsbad
Encinitas
Pasadena
Solana
Beach
Beverly
Hills
All units
15%
Y
5% very low / 5% low / 5% Moderate
(In process of updating)
3+ units
10%
Y
Rental units: low income / For Sale: moderate
income
10+
10%
°
Y
Rental: 11 % low
Owner: 10% moderate
All units
15%
Y
15% low or 12.5% very low
7+ units
10-15/
Y
Rental: 15% if low, 10% very low
Owner: 15% if low, 10% very low
All units
°
20/
Y
Rental: 5% very low 15% low / 10% moderate
Owner: 20% moderate
5+ units
15/
Y
Rental: 15% very low and/or low
Owner: 15%
10+
10%
Y
10% very low, low or moderate
Huntington Beach Overview
F_M
Applicability 3+ units
/o
o Rental: 10 % Low
of Affordable
Ownership: 10% Moderate
In -Lieu Rental: 100 units or less
Threshold Ownership: All projects
Per SF fee based on number of units in project
In -Lieu Fee Rental: $2.54 (3 units) - $25.36 (30+ units) Ownership: $3.58 (3 units) — $35.80 (30+ units)
Alternatives
Off -site construction (15%), land dedication
(20%), off -site conversion/preservation (20%)
Updated in 2021
Possible Ordinance E
Component j Requirement
Applicability
All residential projects w/ net increase in units Citywide /o
o of Affordable Rental: 7% Low or Very low
Ownership: 8% Moderate; 5% Newport Center
In -Lieu Rental: 50 units or less
Threshold Ownership: All projects
Rental: $36.60/SF
In -Lieu Fee Ownership: $33.80/SF
Alternatives
Off -site construction, land dedication, off -site conversion/preservation
Next Steps
• City Council feedback
• Prepare draft ordinance
• Planning Commission public hearings
• City Council public hearings
Inclusionary Housing: Financial
Evaluation and Future Framework
CITY COUNCIL STUDY SESSION
Vol,MAIO
Elm Thank you.
� I
�f Jf J
Questions
. J 1' f f �l Jae 4
Seimone Jurjis
Community Development Director
Kathe Head
Keyser Marston Associates
Jaime Murillo
Principal Planner
FlA f
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[email protected]
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