Planning & Community Development Department
Feasibility Analysis to Consider Increasing
Requirements of the Inclusionary Housing Ordinance
Economic Development & Technology Committee
September 16, 2025
Planning & Community Development Department
2 Introduction
Planning & Community Development Department
Agenda
• Introduction (City Staff)
• Policy Context (City Staff)
• AECOM Analysis (AECOM)
• Alternative Opportunities (City Staff)
• Conclusion & Next Steps (City Staff)
3 Planning & Community Development Department
Introduction
• At the South Fair Oaks Specific Plan
update hearing the City Council
requested staff study increasing the
mandatory affordable set-aside
percentage of the City’s IHO.
• Program #8 of the 2021-2029 Housing
Element also calls to continue to monitor
the effectiveness of the City’s IHO.
4 Planning & Community Development Department
5 Rental
Projects
5% - Very
Low Income
(VLI)
5% - Low
Income (LI)
10% -
Moderate
Income (MI)
For-Sale
Projects
20% -
Moderate
Income (MI)
In Lieu
Fee
Off-Site
Units
Land
Donation
• IHO was last updated in August 2019, when the City Council:
> Eliminated trade downs.
> Increased in-lieu fee.
> Created an affordable housing concession menu.
> Increased the inclusionary percentage requirement
from 15% to 20%.
• Minimum onsite household affordability for projects
with 10 units or more:
Background – IHO
Planning & Community Development Department
6 Policy Context
Planning & Community Development Department
City
Min
Project
Size
Inclusionary
Requirement %
Sub-
Geographies
Deed
Restriction In-Lieu Fee Option
Pasadena 10 units
For Rent: 20%
(5% VLI, 5% LI & 10% MI)
For Sale: 20% (MI)
No
For Rent:
Perpetuity
For Sale: 45 yrs
Yes, can also be combined
with providing some
inclusionary units.
Burbank 5 units
For Rent: 15%
(5% VLI & 10% LI)
For Sale: 15% (LI or MI)
No
For Rent:
Perpetuity
For Sale: 55 yrs
Yes
Glendale 8 units 15% (LI) No 55 years
Yes, can be combined with
providing some
inclusionary units.
Santa
Monica
2 units
2 to 19 Units: 15% LI
20+ Units: 15% requirement
is divided equally between
VLI, LI and Moderate
No 55 years 2-5 unit projects only
West
Hollywood 2 units
2 to 10 Units: 1 unit (LI or
MI)
11+ Units: 20% (LI or MI)
No Perpetuity 2 to 10-unit projects only
Long
Beach 10 units
For Rent: 12% (LI or VLI
depending on submarket)
For Sale: 10% (MI)
Yes - Downtown
and Midtown
Submarkets
and resource
areas.
55 yrs
Yes, for all ownership or
rental 1 to 20 units or if
hardship is found by City
Alhambra 5 units 15% (9% LI & 6% MI) No
For Rent:
Perpetuity
For Sale: 45 yrs
5 to 6 Units: No units
required; in-lieu fee
required
7 to 20 Units or in-lieu
21+: Units required, in-lieu
not an option
• Set aside requirements vary
by percentage required,
project size, and location
within the jurisdiction.
• Comparatively, Pasadena has
one of the highest inclusionary
requirement percentages.
• Many jurisdictions have a
lower minimum project
threshold.
Peer and Neighboring Jurisdictions
Planning & Community Development Department
Developer Interview Takeaways
8 Image by bsd studio
• City staff carried out several interviews with
affordable housing and market rate
developers to gain qualitative information and
insights into the current environment in the
housing market.
• Some general insights include:
> Development costs continue to rise.
> Policy adjustments should be made during a
better time in market cycle.
> Pasadena offers strong development
opportunities, but housing types must be
balanced across affordability level and density.
Planning & Community Development Department
9 AECOM Analysis
Market Context: Specific Plan Areas (SPA)
• SPA Areas contributed 74% of all projects from 2019 to 2023 with nearly all other projects clustered near SPAs. • This suggests that the marketable location and amenity benefits of the SPAs extend just beyond the SPA boundaries.
580
0 0
118
0 0 0
1,139
186 281
0 0 0 76
0 200
400
600
800
1,000
1,200
Units by Specific Plan Area (2019-2023)
Completed Projects Pipeline Projects
10 Market Context: TOD Areas
• TOD Areas contributed 86% of completed units since 2019, and 98% of pipeline. • Recent multifamily development in Pasadena has been synonymous with TOD development 118
664
0 3245
1,118
392
463
0 200
400
600
800
1,000
1,200
Non TOD Both Regional
and Local
TOD
Only Regional
TOD
Only Local
TOD
Units by TOD Area (2019-2023)
Completed Units Pipeline Units
11 Market Context: Land use & Density Cohort
• The highest density zones (with base allowable density >48 DUAC) contribute the highest shares of units (80%). • Low Density areas followed at 12% (<33 DUAC) and Medium Density Areas (33-48 DUAC) contributed 7%. 48 48
650
283
122
1,459
-
200
400
600
800
1,000
1,200
1,400
1,600
Low Density (<33
duac)
Medium Density
(33-48 duac)
High Density (>48
duac)
Units by Density Cohort (2019-2023)
Completed Units Pipeline Units
12 Prototype Development
• The market analysis assessed recent historical and proposed residential developments and provided key inputs into the pro-forma financial modelling process, which resulted in the development of courtyard and podium prototypes for both for rental apartments and for sale condominiums (6 different typologies).
• AECOM also developed both a courtyard and podium typology with ground floor retail to be tested for the higher density land uses.
Typology
Program Single Use Single Use Single Use Mixed Use Single Use Tenure Rental For Sale Rental Rental For Sale
Representative
Examples
Parking Typology
Height
Site SF
DUAC Range
Residenital Typologies for Financial Feasibility Testing Low-Rise Courtyard Mid-Rise Podium
Podium & Underground parking
Madison Courtyard Apartments Union Court MW Lofts
409 N MADISON AVE 645 E UNION ST 218 N EL MOLINO AVE
3-4 stories
3/4 Acre
35-87 87-165
5-7 stories
3/4 Acre
Rental
Mixed Use
Underground Parking
Typology
Program Single Use Single Use Single Use Mixed Use Single Use Tenure Rental For Sale Rental Rental For Sale
Representative
Examples
Parking Typology
Height
Site SF
DUAC Range
Residenital Typologies for Financial Feasibility Testing Low-Rise Courtyard Mid-Rise Podium
Podium & Underground parking
Madison Courtyard Apartments Union Court MW Lofts
409 N MADISON AVE 645 E UNION ST 218 N EL MOLINO AVE
3-4 stories
3/4 Acre
35-87 87-165
5-7 stories
3/4 Acre
Rental
Mixed Use
Underground Parking
Typology
Program Single Use Single Use Single Use Mixed Use Single Use Tenure Rental For Sale Rental Rental For Sale
Representative
Examples
Parking Typology
Height
Site SF
DUAC Range
Residenital Typologies for Financial Feasibility Testing Low-Rise Courtyard Mid-Rise Podium
Podium & Underground parking
Madison Courtyard Apartments Union Court MW Lofts
409 N MADISON AVE 645 E UNION ST 218 N EL MOLINO AVE
3-4 stories
3/4 Acre
35-87 87-165
5-7 stories
3/4 Acre
Rental
Mixed Use
Underground Parking
For Rent Increased Affordability Scenarios
Scenarios were tested which increased the required inclusionary requirement in two ways:
1. Increasing the share of higher affordability units (e.g., a higher proportion of VLI to LI); and
2. Increasing the overall percentage of affordable units (e.g., from 20% to greater than 20%). A mixed-use scenario was tested in the for-rent scenarios as the market typically dictates mixed-use rental units and not ownership.
14 For Rent Increased Affordability Scenario Feasibility Results Density Bonus and
% Affordable
Housing Only Project Mixed Use Project
Courtyard
(Low)
Courtyard-
Smaller
Units
(Medium)
Podium
(High) Courtyard (High) Podium
(High)
25% Affordable & No Bonus:
(Scenario 2-AR)
Very Low
Low
Moderate
5%
10%
10%
Not Feasible Feasible Not Feasible Feasible Not Feasible 25% Affordable & 28% Bonus:
(Scenario 7-R)
Very Low
Low
Moderate
5%
10%
10%
Not Feasible Feasible Feasible Feasible Not Feasible
25% Affordable & 89% Bonus:
(Scenario 6-R)
Very Low
Low
Moderate
15%
0%
10%
Feasible Feasible Feasible Not Feasible Feasible
25% Affordable & 35% Bonus:
(Scenario 9-R)
Very Low
Low
Moderate
10%
10%
5%
Not Feasible Feasible Not Feasible Not Feasible Feasible 15 For Sale Increased Affordability Scenario Feasibility Results Density Bonus and
% Affordable
Courtyard
(Low)
Courtyard-
Smaller
Units
(Medium)
Podium
(High)
25% Affordable & No Bonus:
(Scenario 2-AS)
Moderate 25%
Feasible Feasible Feasible
25% Affordable & 28% Bonus:
(Scenario 1-S)
Moderate 25%
Feasible Feasible Feasible
16 Feasibility Analysis Conclusion
• While a modest increase in affordable housing requirements (additional 5% or shift from MI to LI) could be feasible for only the highest density areas, AECOM recommends maintaining the current ordinance until market conditions change.
• Raising the requirement at this moment of time could prevent the short-term development of both market-rate and affordable homes in the City. • A heightened requirement could distort the market and cause only projects at the densest and highest intensity to be viable.
• The City has one of the highest inclusionary requirements relative to peer jurisdictions, and additional requirements are likely to deter development in the short term and have an adverse impact on housing production in the City.
17 Planning & Community Development Department
18 Alternative Opportunities to Increase
Affordable Housing Production
Planning & Community Development Department
Strategies Inspired by Peer Cities
19 • Consider implementing changes based on policies other cities have adopted such as a lower unit threshold:
> The threshold could be lowered from the current 10-unit requirement to be subject to the inclusionary requirements to a lower number such as five (which is the minimum for Density Bonus eligibility).
> This would potentially result in a greater number of small residential projects being required to include affordable units or pay an in-lieu fee. Options could be to provide one unit for projects of 5-9 units or pay a lower in-lieu fee.
> Between 2019 and 2025, six projects consisting of 5-9 units were completed. Five additional projects are under review. > Requiring one inclusionary unit for each of these projects would have resulted in 11 additional affordable units.
City Min. Project
Size
Pasadena 10 Units
Burbank 5 Units
Glendale 8 Units
Santa Monica 2 Units
West
Hollywood 8 Units
Long Beach 10 units
Alhambra 5 Units
Planning & Community Development Department
Strategies Inspired by Peer Cities
20 • Consider increasing deed restriction in for-sale
housing:
> Increase deed restriction in for-sale housing from
45 years to in perpetuity, the same as rental housing.
> Since its inception in 2001, the inclusionary ordinance has resulted in 96 affordable for-sale units consisting of 50 moderate income, 38 low income, and 8 very low-income
units. These units are deed restricted for 45 years.
City Deed Restriction
Pasadena For Rent: Perpetuity
For Sale: 45 years
Burbank For Rent: Perpetuity
For Sale: 55 years
Glendale 55 years
Santa Monica 55 years
West Hollywood Perpetuity
Long Beach 55 years
Alhambra For Rent: Perpetuity
For Sale: 45 years
Planning & Community Development Department
• Study establishing a residential property vacancy tax:
> The tax would charge a fee for any residential units empty for set length of time (exemptions can be determined for
renovations, hospitalizations, etc.).
• Study establishing a real estate transaction fee:
> The fee would be for all real estate transactions and funds generated would be specifically directed towards the
acquisition/production of affordable housing units.
• Study establishing a commercial development linkage fee:
> The purpose of the fee would be to mitigate the impacts of an increase in affordable housing demand from new worker
households associated with new commercial development.
Fees would be charged based on connection between the
development of commercial projects by type and the demand for affordable housing units. 21
“Investigate the most effective
means available to generate funds
locally to support the construction of
affordable housing in Pasadena,
such as but not limited to a
residential property vacancy tax,
real estate transaction fee, and
commercial development linkage
fee.”
- Housing Element Program #12
“
”
Implementing Housing Element Programs
Planning & Community Development Department
Additional Incentives
• Study offering fee reductions:
> Inclusionary projects currently get a reduction in residential impact fees. Additional fee reductions could be offered, providing lower development costs for qualifying projects. Fees to study may include, but not limited to, residential impact, plan check, and permit processing fees.
• Study expedited permitting:
> An expedited review could be implemented offering
accelerated permitting. Expedited permitting is shown to offset developer cost.
> Program #10 of the Housing Element looks to reduce
processing time for both entitlement and plan checking for affordable housing projects (with 50% or more units for lower- income households).
22 Planning & Community Development Department
Additional Compliance Options
• Study option to convert existing off-
site market-rate units to affordable
units.
• Study option to extend the term of
affordability of existing affordable
units expiring within 3-5 years.
23 Planning & Community Development Department
Apply Inclusionary Requirement to Total Units
(Resulting from Density Bonus)
• The inclusionary requirement is calculated on
the base density allowed. Any additional units
gained through a density bonus are not included
in this calculation.
• There has been discussion about including
bonus units in the inclusionary requirements.
• However, this approach is not allowed under
state law as it would conflict with the state’s
formula for awarding density bonuses based on
affordable units.
24 Image by Siti Masriatun
Planning & Community Development Department
Workforce Housing
25 • Across the State, there is no universal
definition of “workforce housing”,
although it typically falls in a range
from 80 to 150% of Area Median
Income (AMI).
> The 2025 AMI for Los Angeles
County for a family of four is
$106,600.
Planning & Community Development Department
Workforce Housing
26 • In Pasadena, a residential impact fee (RIF) rebate is provided for “workforce housing” units between 121 to 180% of AMI, that provide a recorded 15-year covenant.
• If a new residential development project offers:
> 15% of its units as workforce housing for rent or sale at 121 to 150% of AMI, the workforce housing units shall receive a 50% rebate on the RIF. > 15% of its units as workforce housing for rent or sale within the price range of 151 to 180% of AMI, the workforce housing units shall receive a 35% rebate on the RIF. • There has only been one completed workforce project receiving a RIF rebate in past 10 years:
> Seven units at Lincoln Avenue at Orange Grove Boulevard.
Planning & Community Development Department
Incentivizing Workforce Housing
27 • Per State law, when creating incentives for workforce housing, incentives cannot compete with the incentives of State Density Bonus or make workforce housing more advantageous to provide than lower-income housing. Potential options to study:
• Provide larger RIF rebate for workforce units:
> The rebate discussed on previous slide could be increased to a 75% (for 121 to 150% of AMI units) and 50% (for 151 to 180% of AMI units) rebate on the RIF to provide additional incentive.
• Exempt workforce units from inclusionary requirement:
> For example, if a project has 100 units and 20 of them are proposed to be workforce units, then the number of units used to calculate inclusionary units or in-lieu fee payments would be based 80 units.
Planning & Community Development Department
28 Conclusion & Next Steps
Planning & Community Development Department
Conclusion & Next Steps
29 • Given the current market conditions and the
challenges posed by elevated development
costs and risks, the recommendation is to
maintain the existing inclusionary housing
requirements.
• Receive feedback on this recommendation and
the additional options staff has outlined that can
potentially increase the production of affordable
units.
• If directed to study any of the alternatives
presented, further analysis will be needed to
determine their feasibility, effectiveness and
alignment with the City’s housing goals.
Planning & Community Development Department
Feasibility Analysis to Consider Increasing
Requirements of the Inclusionary Housing Ordinance
Economic Development & Technology Committee
September 16, 2025