Review of Housing In-Lieu Regulations,
Including Use of In-Lieu Fee Funds
Agenda Item 12.C
By: Scot Graham, Community Development Director
Meeting Date: July 1, 2025
Housing In-Lieu Fund Discussion
May 20, 2025 – Council Provides direction to return at a future meeting with a discussion item related to City
Inclusionary Housing/Affordable Housing Policies and use of In-Lieu Funds
•Overview of City’s current Inclusionary Housing policies including In-lieu fees
•Council to provide direction on desired updates to City Housing in-lieu regulation and/or use of In-lieu funds
2 City Inclusionary Housing Policy
Chapter 17.26 PBMC – Inclusionary Housing Requirements
and Affordable Housing Incentives (1998 Code).
17.26.022 Applicability
A. Residential Development
1.For each ten residential units provide one affordable unit; or
2.For five or more residential units provide in-lieu fees equal to or more than five percent of building permit
value; or
3 Inclusionary Housing Requirements cont.
17.26.022 Applicability
A. Residential Development
3. For each ten residential units dedicate one used dwelling or real property equal to or more than the applicable in-lieu fee; or
4. A combination of the above methods subject to city
council approval;
5. Subdivision only…
4 Inclusionary Housing Requirements
17.26.022 Applicability
B. Commercial Development
1.For each five thousand sq. ft. of commercial area,
provide one affordable unit; or
2.For a commercial building five thousand sq. ft. or
greater, provide in-lieu fees equal to or more than two percent of building permit value; or
5 Inclusionary Housing Requirements
17.26.022 Applicability
B. Commercial Development
3. For each five thousand sq. ft. of commercial building provide one used dwelling or real property equal to the value of, or more than, the applicable in-lieu fee; or
4. A combination of the above methods subject to city
council approval.
6 Establishing Housing In-Lieu Fund
17.26.050.D In-lieu fee method/procedures.
Affordable Housing Fund. An in-lieu fee paid and collected pursuant to this chapter shall be deposited into an
affordable housing fund. The affordable housing fund shall be administered by the city's finance director, and shall be used exclusively to provide funding for the provision of affordable housing and for reasonable costs associated with the development of affordable housing, at the discretion of the city council.
7 In-Lieu Fund Program Uses
In-lieu funds may be applied to assist with rental or owner-occupied housing or housing services.
Construction/Rehabilitation
•Creation of new affordable units
•Creation of special needs/transitional housing
•Renovation of existing affordable units
Local Matches - for state and federal affordable housing grants Property/Unit Acquisition: Purchasing property to build affordable housing or purchasing units to be converted to affordable housing 8 In-Lieu Fund Program Uses
•Supporting SLO Housing Trust Fund. In-lieu fees assist HTF to increase supply of affordable housing.
•Smart Share Housing Solutions. Nonprofit connecting people with housing. HomeShare SLO, ADU SLO and Co-Living Collaborative •CAPSLO Energy Services Home Repair program.
•Rental Assistance.
•Equity participation loans, grants, pre-home ownership, co- investment.
•Administration Costs. Funds may also be used to cover
reasonable administrative expenses
9 Recent Housing In-Lieu Activity FY 21 to 25
Revenue FY 21 to FY 25
-In Lieu revenue $270,998
-Net Interest Earnings $120,657
Total Revenue $391,655
10 Recent Housing In-Lieu Activity FY 21 to 25
Expenditures FY 21 to FY 25
Biological Analysis at 4th Street Lot $6,000
Overhead Expenses $6,798
Contributions to Outside Agencies $64,600
HASLO 2655 SB Road Project $1,133,731
PSHH Project 855 N. 4th Street $2,500,000
Total Expenditure $4,711,729
Current In-lieu fund Balance $601,710
11 Questions for Council to Consider
•Are changes to the Inclusionary Housing Ordinance (Chapter 17.26) desired? •Are changes to the way in which the City distributes/applies Affordable Housing In-lieu funds desired? Could be done via resolution. •Are there additional programs the Council would like staff to investigate related to use of in-lieu funds? •Does Council want staff to investigate alternative revenues to bolster the In-lieu fund (housing Impact fee, develop fee associated with building permit fee, real estate tax on home sales)? 12 Questions
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