Redondo Beach City Council
May 9, 2023

INCLUSIONARY HOUSING:

FINANCIAL EVALUATION
Prepared for:

City of Redondo Beach
Prepared by:

Keyser Marston Associates, Inc.

December 6, 2022

TABLE OF CONTENTS
Inclusionary Housing: Financial Evaluation Page i
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 I. EXECUTIVE SUMMARY.................................................................................................... 1 A. Background .......................................................................................................................... 1 B. Inclusionary Housing Program Design ................................................................................. 1 C. Policy Issues for Consideration............................................................................................ 2 D. Financial Analyses................................................................................................................ 3 E. Findings................................................................................................................................ 4 II. KEY COURT CASES AND STATE LEGISLATION.................................................................... 6 A. Court Cases .......................................................................................................................... 6 B. State Legislation................................................................................................................... 8 III. INCLUSIONARY HOUSING PROGRAM CHARACTERISTICS ............................................... 11 A. Survey of Existing Inclusionary Housing Programs............................................................ 11 B. Program Requirements...................................................................................................... 12 IV. METHODOLOGY ........................................................................................................... 16 A. Parameters......................................................................................................................... 16 B. Program Foundation.......................................................................................................... 17 C. Financial Evaluation Structure ........................................................................................... 21 D. Financial Evaluation Organization ..................................................................................... 21 V. OWNERSHIP HOUSING ANALYSES................................................................................. 23 A. Prototypes: Ownership Housing Development................................................................. 23 B. Projected Market Rate Sales Prices: Ownership Housing Development .......................... 24 C. Affordable Sales Price Calculations: Ownership Housing Development........................... 24 D. Pro Forma Analyses: Ownership Housing Development................................................... 25 VI. APARTMENT DEVELOPMENT ANALYSIS......................................................................... 31 A. Caveats............................................................................................................................... 31 B. Prototypes: Apartment Development............................................................................... 31 C. Projected Market Rents: Apartment Development .......................................................... 32 D. Affordable Rents: Apartment Development...................................................................... 33 E. Pro Forma Analyses: Apartment Development................................................................. 33

TABLE OF CONTENTS
Inclusionary Housing: Financial Evaluation Page ii
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 VII. IN-LIEU FEE ANALYSES .................................................................................................. 40 A. Ownership Housing Development..................................................................................... 40 B. Apartment Development................................................................................................... 42 VIII. SUMMARY ................................................................................................................... 44 A. Residential Development Prototypes................................................................................ 44 B. Supportable Inclusionary Housing Requirements............................................................. 45 Inclusionary Housing: Financial Evaluation Page iii
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ATTACHMENTS
Attachment 1: Inclusionary Housing Program Surveys
Appendix A: California
Appendix B: Los Angeles, Orange and San Diego Counties
Attachment 2: Affordable Housing Cost Calculation Methodologies Appendix A: Affordable Sales Price Calculation Methodology Appendix B: Affordable Rent Calculation Methodology
Attachment 3: Ownership Housing Development
Appendix A: Home Sales Survey
Appendix B: Affordability Analyses
Exhibit I Affordable Sales Price Calculations
Exhibit II Value Estimates: Inclusionary Units
Appendix C: Pro Forma Analyses: Base Zoning Prototype
Exhibit I Market Rate Alternative
Exhibit II Moderate Income Alternative –Inclusionary Unit are Allocated Pro Rata with the Bedroom Mix in the Project
Exhibit III Moderate Income Alternative –Units in the Project with the Fewest Number of Bedrooms Fulfill the Inclusionary Requirement Appendix D: Pro Forma Analysis: State Density Bonus Prototype: Inclusionary Housing Component - Very Low Income Apartments
Attachment 4: Apartment Development
Appendix A: Rent Survey
Appendix B: Affordable Rent Calculations
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ATTACHMENTS
Attachment 4: Apartment Development (continued)
Appendix C: Pro Forma Analyses: Small Project Prototype Exhibit I Market Rate Alternative
Exhibit II Very Low Income Alternative
Exhibit III Modified Low Income Alternative
Exhibit IV Moderate Income Alternative
Exhibit V Density Bonus Alternative
Appendix D: Pro Forma Analyses: Large Project Prototype Exhibit I Market Rate Alternative
Exhibit II Very Low Income Alternative
Exhibit III Modified Low Income Alternative
Exhibit IV Moderate Income Alternative
Exhibit V Density Bonus Alternative
Attachment 5: In-Lieu Fee Analysis
Appendix A: Ownership Housing Development
Appendix B: Apartment Development
Exhibit I Small Project Prototype
Exhibit II Large Project Prototype
Inclusionary Housing: Financial Evaluation Page 1
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 I. EXECUTIVE SUMMARY
A. Background
Keyser Marston Associates, Inc. (KMA) was engaged by the City of Redondo Beach (City) to assist in creating an Inclusionary Housing program. Over the past 20+ years, the KMA Los Angeles office has assisted 35 jurisdictions in the Inclusionary Housing program creation process. The KMA evaluation methodology has been continually evolving over the past 20 years. Moreover, each study is tailored to reflect the specific characteristics of the jurisdiction being evaluated.

KMA was tasked with preparing an Inclusionary Housing: Financial Evaluation (Financial Evaluation) that will be used to identify the supportable Inclusionary Housing program requirements. The primary goal is to identify Inclusionary Housing requirements that balance the interests of property owners and developers against the City’s need for affordable housing.

Public Policy Objectives
Inclusionary Housing programs are subject to both statutory parameters imposed by the State Legislature and the rulings in the court cases that have challenged Inclusionary Housing programs over the past 30+ years. These statutes and court rulings are described in Section 2 of this Financial Evaluation. It is important to understand the constraints and opportunities that are created by these statutes and court rulings.

B. Inclusionary Housing Program Design
In 2015, the California Supreme Court ruled in California Building Industry Association v. City of San Jose, 61 Cal 4th 435 (San Jose) that Inclusionary Housing Programs should be viewed as use restrictions that are a valid exercise of a jurisdiction’s zoning powers. However, the San Jose ruling also imposed the following limitations to the requirements that jurisdictions can impose:

1. Inclusionary Housing requirements cannot be confiscatory; and Inclusionary Housing: Financial Evaluation Page 2
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2. Inclusionary Housing requirements cannot deprive a property owner of a fair and reasonable return on their investment.

The court did not provide criteria under which jurisdictions can evaluate these limitations. As a result, each jurisdiction is left to create an evaluation methodology that balances the interests of property owners, developers and the jurisdiction’s need for affordable housing. It is KMA’s practice to take a conservative approach in establishing price controls in order to comport with the court’s ruling.

The first step in designing an Inclusionary Housing program is to identify the factors that will be considered in defining the program’s goals. A common measurement is the unmet need for affordable housing. In this Financial Evaluation the City’s Certified Sixth Cycle Housing Element (Housing Element) have been used for this purpose.

C. Policy Issues for Consideration
The following policy decisions need to be made as part of the Inclusionary Housing program adoption process:

1. The minimum project size that will trigger the Inclusionary Housing requirements.

2. The target income and affordability standards to be applied.

3. The allowable options for fulfilling the Inclusionary Housing requirements. Typical options include:
a. Providing the Inclusionary Units within the market rate project that triggered the requirement.
b. Production of the Inclusionary Units in an off-site location. c. A payment to the City in lieu of producing required Inclusionary Units.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 d. Dedication of land to the City for the subsequent development of the required Inclusionary Units.
e. The acquisition and rehabilitation of existing apartment units.

D. Financial Analyses
Each unit in a market rate project that is required to fulfill income and affordability restrictions creates an impact on the project economics. This is called the “Affordability Gap”, which is defined as difference between the achievable market rate rent or sales price and the allowable rent or sales price for each “Inclusionary Unit”. This Financial Evaluation uses pro forma analyses to estimate the Affordability Gaps generated at varying income and affordability levels.

Prototype apartment and ownership housing developments were created for analysis purposes.

The resources that KMA used to assist in creating the prototypes are:

1. The Housing Element;

2. Development plans for residential projects that were submitted to the City’s Planning Division; and

3. Residential projects identified in KMA’s market surveys.

KMA used pro forma analyses to estimate the Affordability Gaps created by the Inclusionary Housing alternatives being tested. The results were then evaluated to identify requirements that balance the interests of the property owner, the developer, and the City’s unmet need for affordable housing.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 E. Findings

SUPPORTABLE INCLUSIONARY HOUSING REQUIREMENTS
Based on the results of the Financial Evaluation KMA concluded that the following Inclusionary Housing requirements can be supported:

Supportable Inclusionary Housing Requirements
Ownership Housing Development Projects
Supportable Inclusionary Housing Requirement – Base Zoning Standards Pro Rata with the Bedroom Mix in the Project 7%
Units in the Project with the Fewest Number of Bedrooms 10% Section 65915 Density Bonus 1 15%
Supportable Inclusionary Housing Requirement
Apartment Development Projects
Very Low Income 5%
Modified Low Income 7%
Moderate Income 8%
Section 65915 Density Bonus –
Very Low Income 2 14%
1 California Government Code Section 65915 et seq. (Section 65915). Assumes that very low income apartment units are used to fulfill the Inclusionary Housing obligation. Measured against the number of units included in the project. This translates to 19% of the units allowed by the site’s base zoning standards. 2 Measured against the number of units included in the project. allowed by the development site’s base zoning standards. This translates to 21% of the units allowed by the site’s base zoning standards.

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SUPPORTABLE IN-LIEU FEES
An in-lieu fee option is typically offered as part of an Inclusionary Housing program. In this case KMA is recommending that an in-lieu fee option be provided to developers under the following circumstances:

1. The developer can demonstrate that the production of the required affordable housing will create an extreme financial hardship.

2. Projects that include between two and nine units should be allowed to pay an in-lieu fee by right.

3. Projects with an Inclusionary Housing obligation that results in a requirement to produce a fractional units should be allowed to pay a fee in lieu of producing an additional unit.

KMA calculated the in-lieu fee amount based on the following standards:

1. A 7% moderate income requirement for ownership housing developments; and

2. A 7% modified low income requirement for apartment developments.

The resulting in lieu fee amounts are presented in the following table:

Maximum Supportable In-Lieu Fees
Affordability Gap Approach
Ownership
Housing Apartments
In-Lieu Fee Amounts
Per Inclusionary Unit $1,360,000 $578,000
Per Square Foot of Saleable /
Leasable Area $70.80 $39.73
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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 II. KEY COURT CASES AND STATE LEGISLATION
In structuring an Inclusionary Housing Program it is important to remember that the courts and the State Legislature have placed limitations on the price controls imposed Inclusionary Housing Programs:

A. Court Cases

PALMER CASE
In 2009, the California Court of Appeal ruled in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, 175 Cal. App. 4th 1396 (Palmer), that the local affordable housing requirements being imposed by the City of Los Angeles violated the Costa-Hawkins Rental Housing Act (CostaHawkins). Specifically, Costa-Hawkins allows landlords to set the initial monthly rent for a new unit, and then to increase the monthly rent to the market level each time a unit is vacated. The Court found that the imposition of long-term income and affordability restrictions on apartment units is a violation of this provision.

It is commonly believed that the Palmer ruling prohibited jurisdictions from requiring developers to provide affordable apartment units as a part of an Inclusionary Housing program.

In an effort to comply with Palmer, jurisdictions generally took one of the following actions:

The jurisdiction eliminated the requirement that market rate apartment projects provide affordable apartment units; or
The jurisdiction replaced affordable housing production models with a linkage or impact fee methodology; or
The jurisdiction imposed affordable housing requirements as part of negotiated Development Agreements for apartment projects.

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SAN JOSE CASE
In the 2015 San Jose case, the California Supreme Court ruled that Inclusionary Housing Programs should be viewed as use restrictions that are a valid exercise of a jurisdiction’s zoning powers. Specifically, the Court found that Inclusionary Housing requirements are a planning tool rather than an exaction. This is interpreted to mean that an in-lieu fee payment option that is included in an Inclusionary Housing Program, that includes an affordable housing production requirement, is not subject to the AB 1600 nexus requirements imposed by the “Mitigation Fee Act”.3
While Inclusionary Housing Programs are not subject to the Mitigation Fee Act, these programs must comply with the following criteria:

1. The requirements cannot be “Confiscatory”; and

2. The requirements cannot deprive a property owner of a fair and reasonable return on their investment.

The court did not provide criteria under which jurisdictions can determine whether proposed price controls are confiscatory and/or they deprive a property owner of a fair and reasonable return. As a result, each jurisdiction is left to create an evaluation methodology that balances the interests of property owners, developers and the jurisdiction’s need for affordable housing.

It is KMA’s practice to take a conservative approach in establishing the price controls that comport with the court’s ruling.
3 The Mitigation Fee Act is codified in California Government Code §66000 et seq.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 B. State Legislation
ASSEMBLY BILL 1505
Assembly Bill (AB) 1505, which is otherwise known as the “Palmer Fix”, was signed into law on September 29, 2017. AB 1505 amended Section 65850 of the California Government Code and adds Section 65850.01. This legislation provides jurisdictions with the ability to adopt programs that impose Inclusionary Housing requirements on apartment projects.

Rode of the California Department of Housing and Community Development Section 65850.01 does not place a cap on the percentage of units that can be subject to income and affordability restrictions. However, Section 65850.01 (a) gives the California Department of Housing and Community Development (HCD) the authority to review the restrictions imposed by an Inclusionary Housing program on apartment developments if it requires that more than 15% of the units to be restricted to households earning less than 80% of the area median income (AMI), and if one of the following conditions applies:

1. The jurisdiction has failed to meet at least 75% of its Regional Housing Needs Assessment (RHNA) allocation for above moderate income units. This test is measured on a pro-rated basis over the planning period, which is set at a minimum of five years; or

2. HCD finds that the jurisdiction has not submitted their housing element report for at least two consecutive years.

The City has fulfilled the requirements imposed by both of the standards identified above.4 As such, HCD does not have authority under Section 65850.01 (a) to review the Inclusionary Housing requirements the City proposes to impose on apartment development. However, in a 4 For the 2013 – 2021 period the RHNA goal for above moderate income units is 564 units. By the end of 2019, 464 building permits issued were issued for above moderate income units. This equals 82% of the RHNA goal.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 technical guidance memorandum dated October 21, 2019, HCD reaffirmed its authority to review Inclusionary Housing ordinances as part of its review of a jurisdiction’s Housing Element.

Constraints to Housing Development
California Government Code Section 65583 (a) requires the City to analyze potential and actual constraints being placed on the development of housing. If the City chooses to impose a greater than 15% affordability requirement and/or deeper affordability standards on apartment development, HCD can potentially require the City to demonstrate that the Inclusionary Housing requirements do not create a constraint to housing development.

Additional AB 1505 Requirements
California Government Code Section 65850 (g) requires jurisdictions to provide alternative means of fulfilling the affordable housing requirements imposed on apartment projects by an Inclusionary Housing program. Options that can be provided to developers include, but are not limited to:

1. Off-site construction of “Inclusionary Units”;

2. Payment of a fee in-lieu of producing Inclusionary Units;

3. Land donation; and

4. The acquisition and rehabilitation of existing units.

CALIFORNIA GOVERNMENT CODE SECTION 65915 ET SEQ.

A tool that is commonly used to reduce the financial impact associated with the imposition of Inclusionary Housing requirements is the density bonus provided by California Government Code Section 65915 et seq. (Section 65915). Section 65915 requires the City to adopt an ordinance that specifies how it will comply with the State mandated density bonus requirements.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 The City’s adopted ordinance is included in Redondo Beach Municipal Code Title 10 Chapter 5 Article 9 Section 10-5.2100 (Section 10-5.2100), and it was last amended in 2003. Section 65915 has been amended by the State Legislature several times since 2003, and Section 10-

5.2100 has not been amended to reflect those modifications. Until such time as the City density bonus ordinance comports with the statute, State law will automatically prevail over any inconsistencies between State law and Section 10-5.2100.

In July 2013 the First District Court of Appeal held that jurisdictions must agree to count the affordable units used to fulfill the Section 65915 density bonus requirements towards the Inclusionary Housing requirements that will be imposed on a project.5 Based on that ruling, a developer must be allowed to use the same affordable units to fulfill both the Inclusionary Housing requirements and the Section 65915 requirements. However, in order to exercise this option, the developer must apply the more stringent of the two programs’ requirements.

The Section 65915 density bonus can act to materially reduce the financial impacts created by Inclusionary Housing requirements. For that reason, the City should recognize the following:

1. If Inclusionary Housing requirements are imposed it is highly likely that many developers will request Section 65915 density bonuses.

2. The City is required to grant a developer’s request for the statutorily established density bonus along with the requisite number of concessions and incentives, as well as any necessary development standards reductions or waivers.6 5 Latinos Unidos del Valle de Napa y Solano v. County of Napa, 217 Cal. App. 4th 1160 (Napa). 6 Section 65915 (d) (1) identifies three conditions under which requested incentives or concessions can be denied.

However, this does not relieve the City of the obligation to grant the number of incentives or concessions that the project is entitled to under Section 65915 (d) (2).

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 III. INCLUSIONARY HOUSING PROGRAM CHARACTERISTICS
A. Survey of Existing Inclusionary Housing Programs
Over 170 jurisdictions in California currently include an Inclusionary Housing Program as a component in their overall affordable housing strategy. While the unifying foundation of these programs is the objective to attract affordable housing development, the characteristics of these programs vary widely from jurisdiction-to-jurisdiction.

To assist the City in evaluating options for creating an Inclusionary Housing Program it is useful to identify the elements that are typically included in Inclusionary Housing Programs being implemented in California jurisdictions. To that end, KMA compiled information on 87 Inclusionary Housing Programs being implemented throughout California. The survey information is presented in Attachment 1:

1. Table 1 presents the survey results for the 87 jurisdictions; and

2. Table 2 provides more in depth information for the jurisdictions located in Los Angeles, Orange, San Diego, Ventura and Santa Barbara Counties.

The survey results can be summarized as follows:

1. In California, the majority of Inclusionary Housing Programs include a threshold project size below which projects are not subject to the Inclusionary Housing requirements.

Common thresholds fall between three and 10 units. In the KMA survey the median threshold is five units and the average threshold is eight units.

2. The income and affordability standards imposed by Inclusionary Housing Programs vary widely throughout California. The majority of programs have established standards in the range of 10% to 20% of the units in projects that will be subject to the requirements.

However, the following policy variations are commonly found:

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 a. The threshold standards are varied as a reflection of the depth of the affordability being required.
b. Inclusionary Housing requirements have a disproportionate impact on smaller projects, because there are fewer market rate units available to spread the impact created by the income and affordability standards. A sliding scale requirement is sometimes used to mitigate these impacts. c. The length of the covenant period imposed on Inclusionary Units varies from jurisdiction-to-jurisdiction:
i. California Health and Safety Code (H&SC) Section 33413 applies covenant periods of 45 years for ownership housing units and 55 years for apartment units.
ii. H&SC Section 33413 standards are commonly used, but both shorter and longer covenant periods are imposed throughout Inclusionary Housing Programs in California.

B. Program Requirements

FULFILLMENT OPTIONS
Inclusionary Housing programs focus on the production of affordable housing units by imposing specific affordable housing requirements on new development. To comply with the findings in the San Jose case, and the requirements imposed by Sections 65850 and 65850.01, Inclusionary Housing programs must offer developers a range of options for fulfilling the affordable housing requirements. The most common options offered to developers are:

1. Construction of a defined percentage of Inclusionary Unit units within the new market rate residential project;
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2. Construction of a defined percentage of Inclusionary Unit units in a project located in an off-site location;

3. Payment of a fee in lieu of producing Inclusionary Units that the jurisdiction will subsequently use to assist in the development of affordable housing units within the community;

4. The donation of land to the jurisdiction that is appropriate for the development of affordable housing; and

5. The acquisition and rehabilitation of existing units.

The vast majority of Inclusionary Housing programs provide some form of an in-lieu fee payment option. The benefit provided by allowing in-lieu fee payments is that the Inclusionary Housing requirements can be transferred to developers that have experience in constructing affordable housing projects. This is advantageous for the following reasons:

1. Affordable housing developers have specific expertise in the development and operation of affordable housing projects.

2. Dedicated affordable housing projects have access to public funding sources that provide a more cost-efficient way to achieve deeper affordability than can be supported by an Inclusionary Housing requirement. A representative sample of programs that are targeted to dedicated affordable housing projects are:
a. Funds that are awarded by the United States Department of Housing and Urban Development (HUD) such as the HOME and Community Development Block Grant programs;
b. The funds allocated to the City by HCD under the Permanent Local Housing Allocation (PLHA) for Senate Bill 2 (Chapter 364, Statutes of 2017); Inclusionary Housing: Financial Evaluation Page 14
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 c. The federal and state Low-Income Housing Tax Credits (Tax Credits) offered under Internal Revenue Code Section 42;
d. State funding sources such as the Affordable Housing and Sustainable Communities (AHSC) Program; and
e. Los Angeles County Development Authority (LACDA) funding programs.

STRUCTURING ISSUES
As discussed previously, the court in the San Jose case found that the imposition of Inclusionary Housing requirements is a valid exercise of the City’s zoning powers rather than an exaction.

Sections 65850 and 65850.01 amended the California Government Code to expressly allow Inclusionary Housing requirements to be imposed on apartment projects.

It is important for the City to consider the following caveats as part of the Inclusionary Housing program adoption process:

1. Inclusionary Housing requirements cannot be confiscatory or deprive an owner of a fair and reasonable return. However, recognizing that the courts have not defined these terms, the City has some discretion in establishing evaluation parameters.

2. Section 65583 (a) requires the City to analyze potential and actual constraints being placed on the development of housing. Within that context, it is important to recognize that the requirements imposed by the Inclusionary Housing Ordinance can only be expected to fulfill a small portion of the unmet need for affordable housing in Redondo Beach.

In designing an Inclusionary Housing program, it is important to recognize that the imposition of Inclusionary Housing requirements will have an economic impact on residential development. Typically, the result is that over time residential land prices will adjust to reflect the value supported by the market given the restrictions imposed on the property. However, in Inclusionary Housing: Financial Evaluation Page 15
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 some cases property owners may determine that it is more financially advantageous to maintain an existing use rather than to sell the property at a lower price. This can potentially reduce the availability of land for residential development.

The following key factors should be considered in creating Inclusionary Housing requirements:

1. The requirements should balance the interests of property owners and developers against the public benefit created by the production of income restricted units; and

2. The Inclusionary Housing requirements cannot be confiscatory or deprive an owner of a fair and reasonable return on their investment.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 IV. METHODOLOGY
The purpose of this Financial Evaluation is to evaluate the financial feasibility of imposing Inclusionary Housing requirements on residential development in Redondo Beach. The financial feasibility analysis is comprised of the following steps:

A. Parameters
As the first step in the evaluation process it is necessary to identify the parameters that will be applied in the analysis. One measurement is the RHNA, which is used as a tool in the Housing Element process. The 6th Cycle RHNA Allocation Plan covers the period between 2021 and 2029. The City’s 6th Cycle RHNA allocation is presented in the following table:
6th Cycle RHNA Allocation
October 2021 through October 2029
Income Category Total Obligation % of Total
Very Low 936 38%
Low 508 20%
Moderate 490 20%
Above Moderate 556 22%
Totals 2,490 100%
By far, the largest identified unmet need for affordable housing is in the very low income category. This indicates that the City needs to focus on attracting development that serves these households. However, in creating an Inclusionary Housing program it is also important to evaluate the impact the restrictions will have on the developers of market rate housing projects to ensure that onerous requirements are not imposed.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 B. Program Foundation
The courts have held that affordable housing is a “public benefit,” and that locally imposed Inclusionary Housing programs are a legitimate means of providing this public benefit. The courts have tempered this with the requirement that the Inclusionary Housing obligations cannot be confiscatory, and they cannot deprive a property owner of a fair and reasonable return on their investment.

To date, the courts have not provided guidance for determining how these requirements should be measured. As a result it has been necessary for KMA to create a methodology for testing the financial impacts associated with a proposed Inclusionary Housing program.

The KMA approach is based on pro forma analyses of prototype projects that reflect the development types exhibited within the jurisdiction. The KMA methodology has been continually evolving over the past 20 years, and each financial evaluation is tailored to reflect the specific characteristics of the jurisdiction in which KMA is performing the evaluation.

DEVELOPMENT PROTOTYPES
The pro forma analyses that KMA has prepared are based on prototype residential developments. To assist in creating the development prototypes, KMA reviewed the following:

1. City Staff Reports for proposed projects;

2. Development plans that were submitted to the City’s Planning Department; and

3. The townhomes/condominiums and apartments identified in KMA’s market surveys.

It is important to understand that the prototypes used in the Financial Evaluation do not represent actual projects. Instead, the prototypes represent composites of projects that have recently been developed or proposed in Redondo Beach and the results of KMA market surveys. In some instances the development scope will be at a density that is actually less than Inclusionary Housing: Financial Evaluation Page 18
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 the maximum density allowed by the City’s zoning code. This reflects site characteristics and development types being exhibited.

Ownership Housing Development
The prototype ownership housing developments can be described as follows:

Base Zoning Prototype:

The Base Zoning Prototype can be described as follows:

1. The development site area is set at 2.0 acres.

2. The density is set at 17.5 units per acre.

3. The prototype includes 35 townhouse units in the following bedroom mix:
a. 5% one-bedroom units;
b. 10% two-bedroom units;
c. 20% three-bedroom units; and
d. 65% four-bedroom units.

4. The prototype is based on the assumption that the units are served by attached garages, and that the required guest parking spaces are provided at grade.

State Density Bonus Prototype
The State Density Bonus Prototype is based on the assumption that a developer uses Section 65915 to obtain a 35% density bonus on the 2.0 acre development site. A density increase of this magnitude still allows for a townhouse style project to be developed. The characteristics of the development can be described as follows:

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1. The prototype includes 48 units in the following bedroom mix:
a. 5% one-bedroom units;
b. 10% two-bedroom units;
c. 30% three-bedroom units; and
d. 65% four-bedroom units.

2. The prototype is based on the assumption the units are served by attached garages, and that the project utilizes the Section 65915 (p) waiver from the requirement to provide any guest parking spaces.

Apartment Development Prototype
Following KMA’s review of the existing and proposed apartment development in Redondo Beach we noted that the existing inventory is comprised largely of older small apartment projects. However, we were able to identify one newly constructed 12 unit project and two proposed large-scale projects. Using this information along with information derived from our market surveys KMA created a Small Project Prototype and a Large Project Prototype. Section 65915 density bonus analyses were also prepared for the Small and Large Project Prototypes.

Small Project Prototype

1. The development site area is set at 12,500 square feet.

2. The density is set at 35 units per acre.

3. The prototype includes 10 two-bedroom units.

4. The parking is provided in above-ground spaces.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Large Project Prototype

1. The development site area is set at three acres.

2. The density is set at 30 units per acre.

3. The 90 units in the prototype are allocated as follows:
a. 40% one-bedroom units; and
b. 60% two-bedroom units.

4. The parking is provided in above-ground spaces.

PRO FORMA ANALYSIS THRESHOLDS
The KMA pro forma analyses test the following factors to assist in identifying Inclusionary Housing requirements that can reasonably be applied:

1. The reduction in property acquisition cost that would need to be achieved to offset the impact created by the proposed income and affordability requirements;

2. The reduction in developer profit that is caused by the proposed requirements; and

3. The increase in market rate sales prices/rents that would be needed to offset the proposed requirements.

KMA evaluates the results of each of these three tests in order to develop a comprehensive perspective on the financial impacts. These analyses collaboratively inform the KMA conclusion as to the Inclusionary Housing requirements that can be supported.

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Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 C. Financial Evaluation Structure
The analysis structure applied by KMA can be described as follows:

1. KMA prepared financial analyses to assist in creating recommended Inclusionary Housing requirements that balance the interests of property owners and developers against the public benefit created by the production of affordable housing units.

2. In general terms, the financial impact associated with fulfilling Inclusionary Housing requirements within market rate projects is equal to the difference between the achievable market rate sales prices or rents and the allowable sales prices or rents for the Inclusionary Units. This is known as the “Affordability Gap.”

3. The KMA financial analyses identify the range of Inclusionary Housing production requirements that can be supported.

D. Financial Evaluation Organization
The following sections of this Financial Evaluation describe the assumptions, analysis and findings related to ownership housing and apartment developments. The analyses are supported by the following Attachments and Appendices:

Attachment 2: Affordable Housing Cost Calculation Methodology Appendix A Affordable Sales Price Calculation Methodology Appendix B Affordable Rent Calculation Methodology
Attachment 3: Ownership Housing Development
Appendix A Home Sales Survey
Appendix B Affordability Analyses
Appendix C Pro Forma Analyses: Base Zoning Prototype
Appendix D Pro Forma Analyses: State Density Bonus Prototype Inclusionary Housing: Financial Evaluation Page 22
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Attachment 4: Apartment Development
Appendix A Rent Survey
Appendix B Affordable Rent Calculations
Appendix C Pro Forma Analyses: Small Project Prototype
Appendix D Pro Forma Analyses: Large Project Prototype
Attachment 5: In-Lieu Fee Analyses
Appendix A Ownership Housing Development
Appendix B Apartment Development
Inclusionary Housing: Financial Evaluation Page 23
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 V. OWNERSHIP HOUSING ANALYSES
As a general rule, Inclusionary Housing programs tend to set the affordability requirements for ownership housing development at the moderate income level. This is done as a reflection of the fact that higher income households are likely to have more discretionary income to devote to the ongoing costs associated with home ownership than that of lower income households.

The following ownership housing development analyses are based on the assumption that the Inclusionary Housing requirements will be set at the moderate income level. Based on this assumption, KMA estimated the supportable Inclusionary Housing production requirements.

A. Prototypes: Ownership Housing Development
The characteristics of the Ownership Housing development prototypes that were used in the Financial Evaluation are:

Development Scope Summaries
Ownership Housing Development Prototypes
Base Zoning
Section 65915
Density Bonus
Site Area (Acres) 2.0 2.0
Total Number of Units 35 48
Density (Units Per Acre) 17.5 24.0
Unit Mix
One-Bedroom Units 2 2
Two-Bedroom Units 4 5
Three-Bedroom Units 7 10
Four-Bedroom Units 22 31
Parking Attached Garages +
At Grade Spaces
Attached Garages
Inclusionary Housing: Financial Evaluation Page 24
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 B. Projected Market Rate Sales Prices: Ownership Housing Development The prototype analyses reflect average or typical ownership housing projects rather than any specific project. It should be expected that specific projects will vary to some degree from the prototypes.

To assist in projecting the achievable market rate sales prices, KMA compiled sales data for homes in Redondo Beach that were developed within the past 10 years and sold between March 2021 and November 2022 (Attachment 3: Appendix A). This information is used to establish the average sales price per square foot of saleable area for one-bedroom, twobedroom, three-bedroom and four-bedroom homes.

Based on the results of the surveys, the market rate sales prices used in the KMA analysis are presented in the following table:

Projected Market Rate Sales Prices
Ownership Housing Development Prototypes
One-Bedroom Units $880,000
Two-Bedroom Units $1,123,000
Three-Bedroom Units $1,738,000
Four-Bedroom Units $1,840,000
Average Price Per Square Foot
of Saleable Area $766
C. Affordable Sales Price Calculations: Ownership Housing Development Based on the Affordable Sales Price calculation methodology described in Attachment 2:

Appendix A, and the calculations presented in Attachment 3: Appendix B – Exhibit I, the Affordable Sales Prices for moderate income households are presented in the following table:

Inclusionary Housing: Financial Evaluation Page 25
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Affordable Sales Price Estimates
Ownership Housing Development Prototypes
One-Bedroom Units $268,200
Two-Bedroom Units $301,700
Three-Bedroom Units $333,300
Four-Bedroom Units $353,900
D. Pro Forma Analyses: Ownership Housing Development
To assist in establishing the Inclusionary Housing requirements that can be supported, KMA prepared the following pro forma analyses for the ownership housing development analysis:

1. Base Zoning Prototype:
a. A 100% market rate alternative;
b. An alternative that includes a moderate income Inclusionary Housing component with the affordable units spread across the unit mix on a pro rata basis; and c. An alternative that includes an moderate income Inclusionary Housing component in which the moderate income units are allowed to be provided in the smallest units in the project.

2. A State Density Bonus Prototype that includes an Inclusionary Housing component comprised of very low income apartments.

BASE ZONING PROTOTYPE - MARKET RATE DEVELOPMENT ALTERNATIVE The 100% market rate alternative provides a baseline against which to measure the impacts associated with Inclusionary Housing requirements. The pro forma analyses for the 100% market rate unit alternative is presented in Attachment 3: Appendix C – Exhibit I.

Inclusionary Housing: Financial Evaluation Page 26
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 The pro forma tables are organized as follows:

Pro Forma Analysis – Base Zoning Prototype
100% Market Rate Alternative
Ownership Housing Development Prototypes
Table 1: Estimated Development Costs
Table 2: Projected Net Sales Revenue
Table 3: Projected Developer Profit
The developer profit projected to be generated by the 100% market rate alternatives is used as the threshold profit in the evaluation of potential Inclusionary Housing requirements. This profit threshold is applied in the evaluation of two Inclusionary Housing alternatives for ownership development projects. The financial gaps generated by the alternatives being tested represent the impact created by the Inclusionary Housing requirements.

BASE ZONING PROTOTYPE - MODERATE INCOME INCLUSIONARY HOUSING COMPONENT As discussed previously, KMA measured the financial impacts created by the imposition of Inclusionary Housing requirements using three different measurement tools. These three tools were used collaboratively to identify the moderate income requirement that could be feasibly imposed on attached ownership housing development.

The pro forma analyses for the two Moderate Income Alternatives are presented in Attachment 3: Appendix C – Exhibits II and III. The pro forma analysis is organized as follows:

Pro Forma Analysis – Base Zoning Prototype
Moderate Income Inclusionary Housing Component
Ownership Housing Development Prototypes
Table 1: Estimated Development Costs
Table 2: Projected Net Sales Revenue
Table 3: Inclusionary Housing Impacts
The results of these KMA analyses can be summarized as follows:

Inclusionary Housing: Financial Evaluation Page 27
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022

1. The developer profit for the market rate alternative is estimated at 15.4%.

2. The moderate income requirement that can be supported under the two Base Zoning Prototypes are:
a. A 7% requirement if the affordable units are required to be spread on a pro rata basis throughout the unit mix; or
b. A 10% requirement if the affordable units are allowed to be provided in the smallest units in the project.

The financial impacts estimated in the KMA analyses are summarized in the following table:

Inclusionary Housing Production Impacts – Base Zoning Prototype Moderate Income Inclusionary Housing Component
Ownership Housing Development Prototypes
Pro Rata
Allocation
Small Unit
Allocation
Required Property Acquisition Cost Reduction 15% 14%
Developer Profit as a % of Total Development Cost 10.1% 10.2% Sales Price Increase Required to Offset the Impact 4.6% 4.5% Inclusionary Housing: Financial Evaluation Page 28
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 STATE DENSITY BONUS PROTOTYPE:

INCLUSIONARY HOUSING COMPONENT – VERY LOW INCOME APARTMENTS The City Council expressed an interest in evaluating an Inclusionary Housing alternative for ownership housing development under which the developer would be allowed to fulfill the affordable housing requirement with apartment units. In KMA’s experience developers typically couple this option with the Section 65915 density bonus.

KMA tested this concept with the State Density Bonus Prototype, which is based on the following assumptions:

1. A 35% Section 65915 density bonus is applied to the Base Zoning Prototype. This results in a 48 unit project.7

2. The Napa ruling imposes the following requirements on the City:
a. A developer must be allowed to use the same affordable units to fulfill both the City’s Inclusionary Housing requirements and the Section 65915 affordable housing requirements; and
b. The affordable housing obligation must be calculated against the development site’s base zoning standards.

3. The most efficient way to achieve a 35% density bonus under Section 65915 is to allocate 11% of the units allowed by the site’s base zoning to very low income households (Section 65915 (f) (2):
a. The Affordable Rents must comport with the requirements imposed by H&SC Section 50053.
7 The maximum allowable Section 65915 density bonus is 50%. KMA limited the density bonus to 35% percent in order to allow the prototype project to fulfill the parking requirements with attached garages.

Inclusionary Housing: Financial Evaluation Page 29
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 b. Under the Napa ruling, the City must allow very low income density bonus units to be counted towards the fulfillment of very low, low and/or moderate income Inclusionary Housing production requirements.

4. Parking:
a. At a density of 24 units per acre it is assumed that the parking to serve the units can be provided in attached garages.
b. Section 65915 (p) requires the City to grant a developer’s request to waive the requirement to provide any guest parking spaces.

5. KMA estimated the value of the very low income Inclusionary Housing units in Attachment 4: Appendix B -Exhibit 2. The estimates are based on the following:
a. The Affordable Rents are calculated.
b. The operating costs associated with the units are estimated. c. The resulting stabilized net operating income is capitalized at a 5% rate to establish the values of the very low income apartment units.

The pro forma analyses is presented in Attachment 4: Appendix D, and it is organized as follows:

Pro Forma Analysis – State Density Bonus Prototype
Inclusionary Housing Component -
Very Low Income Apartments
Ownership Housing Development Prototypes
Table 1: Estimated Development Costs
Table 2: Projected Net Sales Revenue
Table 3: Inclusionary Housing Impacts
Inclusionary Housing: Financial Evaluation Page 30
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 KMA measured the Inclusionary Housing impacts against the 15.4% profit generated by the Base Zoning Prototype – 100% Market Rate alternative. Based on that analysis KMA concluded that a 19% Inclusionary Housing requirement can be supported when measured against the 35 units allowed by a site’s base zoning, or 15% of the total units included in the 48 unit project.

The financial impacts estimated in the KMA analyses are summarized in the following table:

Inclusionary Housing Production Impacts – State Density Bonus Prototype Inclusionary Housing Component – Very Low Income Apartments Ownership Housing Development Prototypes
Required Property Acquisition Cost Reduction 6%
Developer Profit as a % of Total Development Cost 13.5% Sales Price Increase Required to Offset the Impact 1.6% SUMMARY: OWNERSHIP HOUSING DEVELOPMENT
The results of the ownership housing development analysis can be summarized as follows:

1. Under the Base Zoning Prototype a 7% moderate income requirement can be supported if the affordable units are distributed throughout the project’s bedroom mix on a pro rata bases. This increases 10% if the units are allowed to be allocated to the units in the project with the fewest number of bedrooms.

2. Under the State Density Bonus alternative the supportable Inclusionary Housing requirement increases to 15% of the total number of units included in the project. 8 This
conclusion is predicated on the assumption that the developer is allowed to provide very low income apartment units to fulfill the Inclusionary Housing obligation. 8 This translates to 19% of the units allowed by the site’s base zoning standards.

Inclusionary Housing: Financial Evaluation Page 31
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 VI. APARTMENT DEVELOPMENT ANALYSIS
The City is interested in identifying supportable Inclusionary Housing production requirements for the following income and affordability alternatives:

1. A very low income requirement;

2. A modified low income requirement; and

3. A moderate income requirement.

The apartment development pro forma analyses are used to estimate the supportable Inclusionary Housing production requirements under each of the identified alternatives.

A. Caveats
A variety of tools are available to reduce the financial impact associated with the imposition of income and affordability restrictions on apartment projects. For 100% affordable housing projects, Tax Credit financing is commonly used to fill the financial gap. For mixed income projects, the Section 65915 density bonus is often used.

The prototype analyses are intended to reflect average or typical apartment projects rather than any specific project. It should be expected that specific projects will vary to some degree from the prototype.

B. Prototypes: Apartment Development
The apartment development prototypes used in this analysis were created based on the results of the KMA market surveys, and a review of projects that have recently been proposed or constructed in Redondo Beach. The KMA market surveys were also used to estimate the achievable market rate rents for the prototype units.

The prototypes used in this analysis are described in the following table:

Inclusionary Housing: Financial Evaluation Page 32
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Development Scope Summaries
Apartment Development Prototypes
Small Project Prototype Large Project Prototype
35 Units Per Acre 30 Units Per Acre
Site Area 12,500 square feet 3.0 acres
Total Number of Units 10 90
Unit Mix
One-Bedroom Units N/A 36
Two-Bedroom Units 10 54
Parking Spaces Per Unit 2.33 2.33
C. Projected Market Rents: Apartment Development
In the November 2022, KMA surveyed apartment projects that received three or four stars in the CoStar quality ranking system (Attachment 4: Appendix A). The purpose of this survey was to derive estimates of the currently achievable market rents for the types of projects likely to be constructed in Redondo Beach. However, the characteristics of actual projects will vary to some degree from the prototype being evaluated.

The market rate rent estimates that are used in this Inclusionary Evaluation are as follows:

Projected Average Monthly Market Rate Rents
Apartment Development Prototypes
Small Project Prototype Large Project Prototype
One-Bedroom Units N/A $4,413
Two-Bedroom Units $4,502 $4,727
Average Rent / Sq. Ft. of GLA 9 $4.50 $4.74
9 GLA = gross leasable area.

Inclusionary Housing: Financial Evaluation Page 33
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 D. Affordable Rents: Apartment Development
The Affordable Rent calculation methodology is described in Attachment 2: Appendix B and the Affordable Rent calculations are detailed in Attachment 4: Appendix B. The results are presented in the following table:

Affordable Rents
Apartment Development Prototypes
Income Category
One-Bedroom
Units
Two-Bedroom
Units
Very Low Income $797 $880
Modified Low Income $1,344 $1,495
Moderate Income $1,891 $2,110
E. Pro Forma Analyses: Apartment Development
To assist in establishing the Inclusionary Housing production requirements that can be supported, KMA started with the following basic premises:

1. KMA evaluated a 100% market rate alternative to derive an estimate of the developer return that is generated if no income and affordability requirements are imposed. The return generated from the market rate alternative is used as the threshold return for the various Inclusionary Housing requirements being tested.

2. As discussed previously, this Financial Evaluation is calibrated to establish supportable Inclusionary Housing requirements for each alternative being tested.

MARKET RATE DEVELOPMENT ALTERNATIVE
The pro forma analyses for the market rate development alternatives are found in Exhibit I of Appendices C and D of Attachment 4, respectively:

The pro forma tables are organized as follows:

Inclusionary Housing: Financial Evaluation Page 34
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Pro Forma Analysis - 100% Market Rate Alternative
Apartment Development Prototypes
Table 1: Estimated Development Costs
Table 2: Estimated Stabilized Net Operating Income
Table 3: Estimated Developer Return
The estimated stabilized developer returns on total investment derived from the 100% market rate alternatives are estimated as follows:

1. The stabilized developer return is estimated at 4.87% for the Small Project Prototype; and

2. The stabilized developer return is estimated at 4.89% for the Large Project Prototype.

ALTERNATIVES TESTING – APARTMENT DEVELOPMENT PROTOTYPES The pro forma analyses for the Inclusionary Housing production analyses are presented in the following appendices to Attachment 4:

Inclusionary Housing Production Alternatives
Appendix C – Small Project Prototype
Appendix D – Large Project Prototype
Apartment Development
Exhibit Title
II Very Low Income Alternative
III Modified Low Income Alternative
IV Moderate Income Alternative
V Density Bonus Alternative
The pro forma analyses are organized as follows:

Pro Forma Analyses
Inclusionary Housing Production Alternatives
Inclusionary Housing: Financial Evaluation Page 35
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Apartment Development Prototypes
Table 1: Estimated Development Costs
Table 2: Estimated Stabilized Net Operating Income
Table 3: Inclusionary Housing Impacts
Zoning Compliant Density Alternatives
Small Project Prototype
The Small Project Prototype consists of 10 Units. As a result, an Inclusionary Housing requirement for one affordable unit equates to a 10% requirement. The pro forma analyses of the Small Project Prototype indicate that only a fractional unit requirement, ranging from .5 to .9 units can be supported at the very low, low and moderate income levels.

The financial impacts associated with the fractional unit requirements are summarized in the following table:

Inclusionary Housing Production Impacts – Small Project Prototype Apartment Development
Income Categories
Very Low
Modified
Low Moderate
Supportable Inclusionary Unit Requirement .5 .6 .9
Required Property Acquisition Cost Reduction 13% 13% 16% Stabilized Return on Total Investment 4.65% 4.65% 4.61% % Rent Increase Required to the Offset Impact 4.2% 4.2% 5.2% Large Project Prototype
The Large Project Prototype consists of 90 units, which provides significantly greater opportunities for imposing Inclusionary Housing requirements at various income levels. Based Inclusionary Housing: Financial Evaluation Page 36
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 on the analysis of the Large Project Prototype, KMA concluded that the following affordable housing requirements could be supported at the income levels being evaluated:

Supportable Inclusionary Housing Requirements
Large Project Prototype
Apartment Development
Very Low Income 5%
Modified Low Income 7%
Moderate Income 8%
The financial impacts associated with each of the identified requirements are presented in the following table:

Inclusionary Housing Production Impacts – Large Project Prototype Apartment Development
Income Categories
Very Low
Modified
Low Moderate
Required Property Acquisition Cost Reduction 10% 13% 13% Stabilized Return on Total Investment 4.70% 4.65% 4.66% % Rent Increase Required to Offset the Impact 4.7% 5.3% 5.0% State Density Bonus Alternatives
As discussed previously, the Section 65915 density bonus can act to materially reduce the financial impacts created by Inclusionary Housing requirements. For that reason, it should be assumed that if the City enacts an Inclusionary Housing program, many developers will request Section 65915 density bonuses.

To maximize the benefits associated with the Section 65915 density bonus, while minimizing the financial impact created by the affordability requirements, KMA created the following development prototypes:

Inclusionary Housing: Financial Evaluation Page 37
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022

1. A 50% density bonus is applied. This represents the maximum density bonus allowed under Section 65915.

2. To achieve a 50% Section 65915 density bonus, 15% of the units allowed by the base zoning must be allocated to very low income households (Section 65915 (f) (2)).10 The density bonus alternatives analyses are presented in Exhibit V of Appendices C and D of Attachment 4, respectively. The results of these KMA analyses indicate that the following Inclusionary Housing production requirements can be supported if the Section 65915 density bonus can be used on a financially efficient basis:

Supportable Inclusionary Housing Production Requirements Density Bonus Alternatives
Apartment Development Prototypes
Affordable Housing Requirement
as a % of Base Zoning Units
Small Project Prototype Large Project Prototype
49 Units Per Acre 41 Units Per Acre
State Density Bonus:

Very Low Income Unit
Requirement

20.0% 11 15.0%
Supportable Inclusionary Housing Requirements
Units Allowed by Base Zoning 20% 21%
Total Units in the Project 13% 14%
The financial impacts estimated in the KMA analyses are presented in the following table:
10 Under the Napa ruling, the City must also allow these units to be counted towards the fulfillment of low and/or moderate income Inclusionary Housing production requirements. 11 The actual requirement imposed by the Section 65915 density bonus is for 15% of the units allowed by the site’s base zoning standards. However, Section 65915 (q) requires all fractional numbers to be rounded up to the next whole number. This results in a requirement for two affordable units when the mathematical result is 1.5 units.

Inclusionary Housing: Financial Evaluation Page 38
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Inclusionary Housing Production Impacts – State Density Bonus Prototypes Apartment Development Prototypes
Small Project Prototype Large Project Prototype
52 Units Per Acre 45 Units Per Acre
Required Property Acquisition
Cost Reduction 14% 0%
Stabilized Return on Total
Investment 4.71% 4.7%
Rent Increase Required to
Offset the Impact 3.1% 0%
As can be seen in the preceding tables, the use of the Section 65915 density bonus is projected to materially increase the Inclusionary Housing production requirements that can be supported.

However, this finding is predicated on the assumption that a developer can efficiently make use of the density bonus in terms of both construction type and financial characteristics.

SUMMARY: APARTMENT DEVELOPMENT
The results of the apartment development analysis can be summarized as follows:

1. Small apartment projects are disproportionately impacted by the imposition of affordable housing requirements. The results of the KMA analysis indicate that a 10- unit apartment project can potentially support a one unit Inclusionary Housing requirement if the income threshold is set at the moderate income level. 12 2. There is more flexibility with large scale apartment development. The KMA analysis found that any one of the following Inclusionary Housing requirements could be supported:
12 The analysis actually supports a 9% moderate income Inclusionary Housing requirement. This is rounded up to one unit.

Inclusionary Housing: Financial Evaluation Page 39
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Very Low Income 5%
Modified Low Income 7%
Moderate Income 8%

3. The use of the Section 65915 density bonus can potentially support an Inclusionary Housing requirement at 20% to 21% of the units allowed by a site’s base zoning standards. This equates to 13% to 14% of the total units developed in a density bonus project.

Inclusionary Housing: Financial Evaluation Page 40
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 VII. IN-LIEU FEE ANALYSES
There appears to be consensus among the City Council members that an in-lieu fee payment option should only be provided to developers in limited circumstances. The following in-lieu fee analyses are provided to assist the City in creating specific in-lieu fee policies to be applied as part of the Inclusionary Housing Program.

It is KMA’s opinion that at a minimum the City should allow developers to pay an in-lieu under the following circumstances:

1. The developer can demonstrate that the production of the required affordable housing will create an extreme financial hardship.

2. Projects that include between two and nine units should be allowed to pay an in-lieu fee by right.

3. Projects with an Inclusionary Housing obligation that results in a requirement to produce a fractional units should be allowed to pay a fee in lieu of producing an additional unit.

This section of the Financial Evaluation provides estimates of the in-lieu fees that would need to be charged in order to attract a developer to produce the required number of affordable units in off-site locations. The results can be used to create in-lieu fee schedules.

A. Ownership Housing Development
KMA estimated the supportable in-lieu fee amounts for ownership housing development based on the Affordability Gap associated with the on-site development of Inclusionary Units within market rate ownership housing projects. The calculations are presented in Attachment 5:

Appendix A.

Inclusionary Housing: Financial Evaluation Page 41
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 The pro forma analyses presented in the Ownership Housing Development Analysis section of this Financial Evaluation supported a maximum on-site Inclusionary Housing requirement of 10%. Based on that requirement, KMA estimated the weighted average Affordability Gaps and arrived at the following in-lieu fee estimates:

Maximum Supportable In-Lieu Fees
Affordability Gap Approach
Ownership Housing Development Prototypes
Moderate Income Unit Percentage 10%
In-Lieu Fee Per Inclusionary Unit $1,360,000
In-Lieu Fee Per Square Foot of Saleable Area $70.80
The resulting in-lieu fee schedules are presented in the following table:

In-Lieu Fe Schedule
Affordability Gap Approach
Ownership Housing Development Prototypes
Number of
Units
Fee / SF X
Total Building Area
Fractional
Units
Fee / SF X
Average Unit Size
2 $7.87 .1 $61.90
3 $15.73 .2 $123.90
4 $23.60 .3 $185.80
5 $31.47 .4 $247.80
6 $39.33 .5 $309.70
7 $47.20 .6 $371.60
8 $55.07 .7 $433.60
9 $62.93 .8 $495.50
10 $70.80 .9 $557.50
Inclusionary Housing: Financial Evaluation Page 42
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 B. Apartment Development
KMA estimated the supportable in-lieu fee amounts for apartment development based on the Affordability Gaps associated with the on-site development of Inclusionary Units within market rate apartment projects. The Affordability Gaps for apartment units are estimated in Attachment 5: Appendix B using the following methodology:

1. KMA prepared the analysis based on a 7% modified low income requirement Inclusionary Housing requirement.

2. The differences between the estimated achievable market rate rents and the defined Affordable Rents were calculated for one- and two-bedroom units.

3. KMA assumed that the property taxes for projects that include designated affordable housing units would be based on a lower assessed value due to the reduction in net operating income that would be generated by the project. KMA deducted this lower property tax expense from the estimated rent difference.

4. The “Net Annual Rent Difference Per Inclusionary Unit” is equal to the “Annual Rent Difference Per Inclusionary Unit” minus the property tax savings.

5. The “Affordability Gap Per Inclusionary Unit” is equal to Annual Rent Difference Per Inclusionary Unit capitalized at the benchmark returns derived from the pro forma analyses of the market rate scenarios.

6. The Affordability Gaps Per Inclusionary Unit were translated into in-lieu fees per square foot of leasable area.

The KMA in-lieu fee calculations for apartment development projects are summarized in the following table:

Inclusionary Housing: Financial Evaluation Page 43
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Maximum Supportable In-Lieu Fees
Affordability Gap Approach
Apartment Development
Modified Low Income Unit Percentage 7%
In-Lieu Fee Per Inclusionary Unit $578,000
Per Square Foot of Leasable Area $39.73
The resulting in-lieu fee schedules are presented in the following table:

In-Lieu Fe Schedule
Affordability Gap Approach
Apartment Development Prototypes
Number of
Units
Fee / SF X
Total Building Area
Fractional
Units
Fee / SF X
Average Unit Size
2 $3.97 .1 $59.60
3 $7.95 .2 $119.20
4 $11.92 .3 $178.80
5 $15.89 .4 $238.40
6 $19.86 .5 $298.00
7 $23.84 .6 $357.50
8 $27.81 .7 $417.10
9 $31.78 .8 $476.70
10 $35.75 .9 $536.30
Inclusionary Housing: Financial Evaluation Page 44
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 VIII. SUMMARY
The following section summarizes the results of this Financial Evaluation. The findings provide the basis for KMA’s recommendations for the package of requirements to be imposed by an Inclusionary Housing Ordinance.

A. Residential Development Prototypes
The development scopes for the residential development prototypes that were analyzed in this Financial Evaluation are presented in the following tables:

Ownership Housing Development Prototypes
Base Zoning
Section 65915
Density Bonus
Site Area (Acres) 2.0
Site Area (Square Feet) 87,120
Total Number of Units 35 48
Density (Units Per Acre) 17.5 24
Apartment Development Prototypes
Small Project Large Project
Base
Zoning
§65915
Density
Bonus
Base
Zoning
§65915
Density
Bonus
Site Area (Acres) .29 3.0
Site Area (Square Feet) 12,500 130,680
Total Number of Units 10 15 90 135
Density (Units Per Acre) 35 52 30 45
The market rate ownership housing sales price and apartment rent estimates applied in this analysis are provided in the following tables:

Inclusionary Housing: Financial Evaluation Page 45
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 Projected Market Rate Sales Prices
Ownership Housing Development Prototypes
One-Bedroom Units $880,000
Two-Bedroom Units $1,123,000
Three-Bedroom Units $1,738,000
Four-Bedroom Units $1,840,000
Average Price Per Square Foot
of Saleable Area $766
Projected Average Monthly Market Rate Rents
Apartment Development Prototypes
Small Project Prototype Large Project Prototype
One-Bedroom Units N/A $4,413
Two-Bedroom Units $4,502 $4,727
Average Rent / Sq. Ft. of GLA $4.50 $4.74
B. Supportable Inclusionary Housing Requirements
Based on the results of the preceding Financial Evaluation, KMA reached the following conclusions:

INCLUSIONARY HOUSING REQUIREMENTS:

The supportable Inclusionary Housing requirements are set as percentages of the number of units allowed by a site’s base zoning standards:

1. Ownership Housing Development:
a. The supportable moderate income Inclusionary Housing requirement are:
i. 7% if the units are allocated on a pro rata basis with the bedroom mix in the project.

Inclusionary Housing: Financial Evaluation Page 46
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022 ii. 10% if the units are allocated to the units in the project with the fewest numbers of bedrooms.
b. A 15% very low income requirement can be supported if the Section 65915 density bonus is applied and very low income apartment units are used to fulfill the income and affordability requirements.13

2. Apartment Development:
a. On-Site Development
i. A 5% very low income requirement can be supported.
ii. A 6% modified low income requirement can be supported. iii. A 9% requirement moderate income requirement can be supported. b. A 14% very low income requirement can be supported if the Section 65915 density bonus is applied.14
It is KMA’s assumption that the Inclusionary Housing requirements will be set at the low end of the range for small projects and then stepped up for larger project. The actual percentage set asides will be determined based on City Council input.

SUPPORTABLE IN-LIEU FEES
It is KMA’s opinion that at a minimum the City should allow developers to pay an in-lieu under the following circumstances:

1. The developer can demonstrate that the production of the required affordable housing will create an extreme financial hardship.
13 This translates to 19% of the units allowed by the site’s base zoning. 14 This translates to 21% of the units allowed by the site’s base zoning.

Inclusionary Housing: Financial Evaluation Page 47
Keyser Marston Associates, Inc. 2212003.RB / 19932.002.001 December 6, 2022

2. Projects that include between two and nine units should be allowed to pay an in-lieu fee by right.

3. Projects with an Inclusionary Housing obligation that results in a requirement to produce a fractional units should be allowed to pay a fee in lieu of producing an additional unit.

The in-lieu fee amounts supported using the Affordability Gap Approach are currently estimated as follows:

Maximum Supportable In-Lieu Fees
Affordability Gap Approach
Ownership
Housing Apartments
In-Lieu Fee Amounts
Per Inclusionary Unit $1,360,000 $578,000
Per Square Foot of Saleable /
Leasable Area $70.80 $39.73
ATTACHMENT 1

INCLUSIONARY HOUSING PROGRAM SURVEYS

REDONDO BEACH, CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey Page 1 of 13

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period
I. Inclusionary Requirements: Both Rental and Ownership Projects Albany Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 15% Yes 5 Perpetual 5 Perpetual Agoura Hills
Create on-site units; pay an in-lieu fee for the required Low and/or Moderate Income Units. In-lieu fee cannot be paid to fulfill the very low income requirement.
15% N/A 10 7% @ VL + 4% @
Low + 4% @ mod 55 10 7% @ VL + 4% @ Low + 4% @ mod 45
Alhambra Create on-site units; create off-site units; pay in-lieu fee; donate land 15% No 7 9% @ 120% + 6% @ 80%
7 9% at 120% + 6%
at 80%
Avalon Create on-site units; create off-site units; pay in-lieu fee 20% No 4 Decided per project
55 4 Decided per
project
55 Brea Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 10% No 20 Not defined 55 20 120% 45 Campbell Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 15% No 10 6% @ VL + 9% @ Low 55 10 120% 45
Capitola Create on-site units; pay in-lieu fee 15% Yes 7 120% Life of Bldg Carlsbad Create units; pay in-lieu fee. City Council may approve additional alternative fulfillment options. 15% No 1 Low 55 1 Low 30 Chula Vista
Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land. Excludes area west of I-805 identified as "Area of Low/Moderate Income Concentration".
10% No 50 5% @ Low + 5% @
Mod Life of Bldg 50 5% @ Low + 5% @ Mod Life of Bldg
Colma Create on-site units; pay in-lieu fee 20% No 5 5% @ VL + 5% @ Low + 10% @ Mod 55 5 5% @ VL + 5% @ Low + 10% @ Mod 45
Concord Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 10% Yes 5 55 5 45
Contra Costa County
Create on-site units; create off-site units; pay in-lieu fee; donate land. Program requirements are only applied in
designated areas.
15% No 5 3% @ VL + 12% @
Lower
5 3
Coronado Create units; pay in-lieu fee 20% No 2 Low 2 Mod Cupertino 1-7 units pays in-lieu fee. Create on-site units; create off-site units; pay impact/linkage fee; donate land 15% No 7 50% / 80% 99 7 50% /120% 99 Davis Create on-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 10% - 25% No 5-19 , 20+
5-19: 15% @ 80%
or 10% @ 50%.
20+: 25% @ 80%
or 10% @ 50%
Perpetual 5 120% Perpetual
Rental Development Ownership Development
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; Incl Survey Page 2 of 13

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period
Rental Development Ownership Development
Downey Create on-site units; create off-site units; pay in-lieu fee in the case of extreme hardship for apartments 11%/10% No Mod >55 or as long as resid Mod 45 Dublin Create on-site units; create off-site units; pay in-lieu fee; donate land 12.5% No 20
50% @ 120% +
20% @ 80% + 30%
@ 50%
55 20 5% @ 80% + 7.5%
@ 120% 55
Emeryville Create on-site units; pay impact/linkage fee 12%/20% No 4% @ VL + 8% @ Low
55 10 55
Encinitas Create on-site units; create off-site units; create ADU's; preserve at-risk units; pay in-lieu fee; donate land 10%/15% No 7 10% @ VL or 15% @ Low Perpetual 7 10% VL or 15% @ Low Perpetual Fillmore Create on-site units; pay in-lieu fee; donate land 15% No 4 20+: 5% ELI or VL
& 10%; Low 17-19:
2 low + one ELI or
VL; 10-16: 2 low; 5-
9:: 1 low
55 4
20+: 5% ELI or VL
& 10%; Low 17-19:
2 low + one ELI or
VL; 10-16: 2 low; 5-
9:: 1 low
45 Fremont Has a production option, but the in-lieu fee option is more cost effective 15% No 2 10% @ Low 2 5% @ Mod + 10% @ Low Fort Bragg Create on-site units 10% to 20% 5 80% / 120% 5 100% /120% 15 Goleta
Create on-site units; create off-site units; donate land, pay inlieu fee; acquisition/rehabilitation. Income/Affordability trade off of extremley low and very low income units to low and moderate income units in demonstrated extreme
hardship.
25% -
reduced to
20% with
public
benefit
No 2

2.5% @ ELI + 2.5%
@ VL+ 5% @ Low
+ 5% @ Mod + 5%
at Above Mod
In general
45 to 55
years, but
not less
than 30
years
2 2.5% @ ELI + 2.5%
@ VL+ 5% @ Low
+ 5% @ Mod + 5%
at Above Mod
In general
45 to 55
years, but
not less
than 30
years
Hayward Create on-site units; create off-site units; pay in-lieu fee; pay impact/linkage fee; donate land
6% / 7.5% -
10%
No 2 3% @ 50% + 3% @
60%
55 2 110% 45
Huntington Beach Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 10% No 3 80% 55 3 120% 45 Irvine
Projects with fewer than 50 units can create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land. Projects with 50+ units must produce the affordable units on site.
15% No 50 50%, 80% & 120%
Defined credits 30 50 50%, 80% & 120% Defined credits 30 La Habra Create on-site units; create off-site units; pay in-lieu fee; acquisition/rehabilitation. 15% No 10 9% @ Mod + 6% @ VL & Low 55 10 110% 45 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; Incl Survey Page 3 of 13

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period
Rental Development Ownership Development
Long Beach Create on-site units; pay in-lieu fee; donate land 11%/10% No 10 50% >55 or as
long as resid 10 110%
>55 or as
long as resid
Los Altos Create on-site units; create off-site units. Program requirements are only imposed in designated areas.

Rental: 5-9
@ 15% &
10+ @ 30%.

Ownership
@ 15%
No 5
5-9: 15% @ Mod,
10+: 5% @ Low +
15% @ Mod
30 10 7.5% @ Mod,

7.5% @ Low 30
Menlo Park Create on-site units; create off-site units; pay in-lieu fee 10% Yes 5 80% /120% 5 80% /120% Mill Valley Create on-site units 25% Yes 4 120% Perpetual 4 120% Perpetual Nevada County Create on-site units; create off-site units Program requirements are only applied in designated areas. No 20 30 20 30 Oceanside
Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land; purchase credits from another project.
10% No 3 Low (80%) 55 3 Mod (120%) 55
Oxnard Create on-site units; create off-site units; pay in-lieu fee in limited circumstances 10% No 10 5% @ VL + 5% Low
55 10 Low 20
Pacifica Create on-site units; create off-site units; pay in-lieu fee; donate land 15% No 8
6% @ VL + 4.5% @
Low + 4.5% @
Mod
55 8 45
Palo Alto Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 20% Yes 5
5% @ 35% + 10%
@ 50% + 5% @
60%
59 5 10% @ 80% + 10%
@ 120% 59
Pasadena Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 20% No 1 5% @ 50% + 5% @
80% + 10% @
120%
Perpetual 1 110% 45
Petaluma Create on-site units; pay in-lieu fee; donate land 15% No 5 7.5% @ VL; 7.5% @ Low
45 5 7.5% @ Low +

7.5% @ Mod 55
Pleasanton
Create on-site units; create off-site units; pay in-lieu fee; donate land; credit transfers; other alternate methods of compliance
15% Yes 15 50% to 80% 15 50% to 120% Perpetual
Pomona Create on-site units; create off-site units; pay in-lieu fee; donate land
13% / 7%-
11%
Yes 3 120% Perpetual 3 120% 45
Redondo Beach Create on-site units; create off-site units; pay in-lieu fee up to nine units. Fractional unit obligations are rounded down 10%-15% /
9%-15% Yes 2 Moderate >75 or as long as resid 2 Moderate 55 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; Incl Survey Page 4 of 13

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period
Rental Development Ownership Development
Redwood City Create on-site units; create off-site units; preserve or rehab units; pay impact/linkage fee; donate land 20% / 15% No 20 10% @ Mod + 5% @ Low + 5% @ VL 30 5 Moderate 30
Sacramento County Has a production option, but the in-lieu fee option is more cost effective 10% No 1 80% 1 80%
San Bruno Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land. Excludes area 15% No 10 6% VL + 4.5% Low + 4.5% Mod 55 10 6% Low + 9% Mod 45 San Buenaventura
(Proposed Update)
Create on-site units; create off-site units; pay in-lieu fee; preserve or rehab existing housing; donate land 15% / 10% No 7 Low 55 7 Mod 45 San Diego
Create on-site units; create off-site units; rehabilitate existing units, SRO hotel rooms, or conversion of guest rooms; pay inlieu fee; donate land. The amended requirements were approved in 2020 and are being phased in over five years. 10% to 15% No 10 10% @ 60% 55 10 10% @ 100% or
15% 120%
15 San Francisco
Create on-site units; create off-site units; pay in-lieu fee. Full schedule goes into effect in 2023 for rental and 2025 for ownership.
15% to 20%
/ 15% to
26%
Yes 10 55% to 110% 10 80% to 130%
San Jose
Create on-site units; create off-site units; preserve or rehab units; in-lieu fee; donate land; credit transfers; reduction for deeper affordability
15% Yes 10 5% @50% + 5% @
60% + 5% @ 100% Perpetual 10 120% Perpetual
San Juan Capistrano Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 10% No 2 55 2 55 SLO County
Multiple subareas and requirements. Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land
15% Yes
1, 2 or 11
depending
on subarea
Coastal: 15% at
Low or 15% at
Mod
55 1, 2 or 11
depending
on subarea
Coastal A: 5% VL +
5% Low + 5% Mod
+ 5% 120-150%.

Coastal: 15% Low.

Inland: 2% VL +
2% Low + 2% Mod
+ 2% 120-150%.

Coastal: 45
Inland:

Perpetuity
San Mateo County Create on-site units, pay in-lieu fee 20% Yes 5 10% @ ELI + 10% @ Low Life of Bldg 11 10% @ Low + 10% @ Mod 45
San Rafael Create on-site units; pay in-lieu fee 10% No 2 2 120% Santa Ana
Only applies to changes in land use and zoning designations.

Create on-site units; off-site units; substantially rehab existing units; pay in-lieu fee
Rental: 5% -
15% & Own:
5%
No 5
15% @ Low or
10% @ VL or 5%
@ ELI or 5% Low +
3% VL +2% ELI
55 5 120% 55
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; Incl Survey Page 5 of 13

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period
Rental Development Ownership Development
Santa Barbara (City) Create on-site units; create off-site units; pay in-lieu fee for 1 to 9 & fractional units; donate land 10% / 15% No 5 Mod 90 1 120% to 200% 90 / restarts
on each
resale
Santa Cruz Create on-site units; create off-site units; pay in-lieu fee; donate land 15% Yes 2 80% Perpetual 2 120% Perpetual
Santa Monica Create on-site units; create off-site units; pay in-lieu fee; donate land 5% to 30% Yes 2 50%, 80% & 120%
Defined credits 55 2 50%, 80% & 120% Defined credits 55 Santa Paula Create on-site units; create off-site units; pay in-lieu fee 10% to 17% Yes 10 15% Low or 10% VL
55 10 15% Low or 10%
VL
45 Santa Rosa Has a production option, but the in-lieu fee option is more cost effective
5% to 8% /
10%
No 1 5% @ 50% or 8%
@ 60%
2 110%
Sonoma Create on-site units 20% Yes 5 120% 55 5 120% 55 Sonoma County Create on-site units; create off-site units; pay in-lieu fee; donate land
10% or 15%
/ 20% Yes 1

7.5% @ VL + 7.5%
@ Low, or 5% @
ELI + 5% @ VL
55 1 10% @ Low + 10%
@ Mod 30
South San Francisco Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee 20% No 4 55 4 55
Sunnyvale Create on-site units; create off-site units; pay in-lieu fee; donate land, unit conversion, other proposals 15.0% No 7 5% @ 50% + 10% @ 60% 55 7 100% 30
Tiburon Create on-site units; create off-site units; pay in-lieu fee 15% 3 5% @ Low + 10% @ Mod Perpetual 3 5% @ Low + 10% @ Mod Perpetual
Union City Create on-site units; create off-site units; pay in-lieu fee 15% No 7 4.5% @ VL +

10.5% @ Low 7

1.5% @ Low +

4.5% @ 100% +
9% @ 120%
West Sacramento Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 10% No 5 5% @ 50% + 5% @ 60% 55 5 70% 45
West Hollywood Create on-site units; create off-site units; pay in-lieu fee for 2- 10 unit projects 20% No 2 Low / Mod As long as resid 2 Low / Mod As long as resid Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; Incl Survey Page 6 of 13

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period
Rental Development Ownership Development
II. Inclusionary Requirements: Ownership Projects Only
Alameda Create on-site units; create off-site units; pay in-lieu fee 15% No 5 4% @ VL + 4% @ Low + 7% @ Mod 59
Carpinteria Create on-site units; pay in-lieu fee in limited circumstances 12% No 5 200% 30 Danville Create on-site units; pay in-lieu fee 10% Yes 7 110% 20 Folsom Create on-site units; create off-site units; pay in-lieu fee; donate land; acq/rehab; other proposals 10% No 10 3% @ VL + 7% @ Low Lafayette Create on-site units; create off-site units 15% No 2 9% @ Mod + 6% @ VL
45 Monterey Create on-site units; donate land 20% No 6 Perpetual Mountain View Create on-site units; pay in-lieu fee 15% No 3 100% 55 Rohnert Park Create on-site units; create off-site units; pay in-lieu fee 15% No 50 55 San Clemente
Create on-site units; create off-site units; pay in-lieu fee; donate land; or a combination recommended by the
Community Development Director.
4% No 6 50%
San Leandro Create on-site units; pay in-lieu fee 15% Yes 2 9% @ Mod + 6% @ Low
55 San Mateo County Create on-site units; create off-site units; pay in-lieu fee; donate land 20% No 5 10% @ Low + 10% @ Mod 55
5-19: 1 Mod. 20+:

South Coast: 2.5%
VL + 2.5% Low +
5% Mod + 5%
Workforce
45 - restarts
up to 90
Santa Ynez: No
Workforce
Santa Maria &
Lompoc: 2.5% VL
+ 2.5 Low
Thousand Oaks Create on-site units; create off-site rental units; pay in-lieu fee 10% No 5 Mod 45
Santa Barbara County Create on-site units; create off-site units in the coastal zone; pay in-lieu fee for certain unit types 5% - 15% Yes 5
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; Incl Survey Page 7 of 13

APPENDIX A

INCLUSIONARY HOUSING PROGRAM SURVEYS - CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period
Rental Development Ownership Development
III. Inclusionary for Ownership Projects & Impact Fee for Rental Projects Berkeley Create on-site units; pay in-lieu fee 20% No 5 10% @ 80% + 10% @ 50% Perpetual
San Carlos Create on-site units; create off-site units; pay impact/linkage fee 15% Yes 55 2 10% @ Mod + 5% @ Low
45 Truckee
Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; pay impact/linkage fee; donate land. Requirements vary by zones, neighborhoods or districts.
15% No 7 Perpetual 7 Perpetual
IV. Mandatory Inclusionary for Ownership Projects & Voluntary Inclusionary for Rental Projects Pittsburg Create on-site units; pay in-lieu fee 15%/20% Yes 5 9% @ Mod + 6%
@ Low, or 20% @
Mod
Salinas Create on-site units; create off-site units; donate land 20% No 10 30 San Juan Bautista Create on-site units; pay impact/linkage fee 6% 6 80% San Luis Obispo Create on-site units; pay in-lieu fee; donate land 3% Yes 55 5 45 San Marcos Create on-site units; create off-site units; preserve or rehab existing housing; pay in-lieu fee; donate land 15% No 55 120% 55 Solana Beach Create on-site units; create off-site units; preserve or rehab existing housing; pay impact/linkage fee 15% No 5 55 5 45 V. Rental Projects Only
Glendale Create on-site units; create off-site units; pay in-lieu fee; donate land 15% No 8 60% 55
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; Incl Survey Page 8 of 13

APPENDIX B

INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE, SAN DIEGO, VENTURA & SANTA BARBARA COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period In-Lieu Fee
I. Inclusionary Requirements: Both Rental and Ownership Projects Alhambra On-site or pay in-lieu fee. 15% No 7
9% at 120% &
6% at 80%
7 9% at 120% + 6%
at 80%
Fee Schedule: 5 -20 units.

Rental: $0.89 - $14.30/SF; Ownership:
$1.88 - $30.00/SF
Agoura Hills
Create on-site units; pay an inlieu fee for the required Low and/or Moderate Income
Units. In-lieu fee cannot be
paid to fulfill the very low
income requirement.
15% N/A 10
7% @ VL +
4% @ Low +
4% @ mod
55 10 7% @ VL + 4% @
Low + 4% @ mod 45
Set in 2018 to be consistent with the
Affordability gap. $285,336 per VL
apartment unit, $262,541 per low income
condominium unit, and $427,002 per
moderate income single family home.

Brea
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land
10% No 20 55 20 120% 10 Calculated per project. Based on the Affordability Gap
Carlsbad Create units; pay in-lieu fee 15% No 1 Low 1 Low Available up to 6 units. $8,515 for on SFH. $15.00/SF for 2-6 unit projects.

Chula Vista
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land. Excludes
area west of I-805 identified as
"Area of Low/Moderate
Income Concentration".
10% No 50 5% @ Low +
5% @ Mod Life of Bldg 50 5% @ Low + 5% @
Mod Life of Bldg In-lieu fee is based on the median home price minus the affordable home price
Coronado Create units; pay in-lieu fee 20% No 2 Low 2 Mod In-lieu fee paid by right. $7,000 per market rate unit
Downey Create on-site units; create offsite units; pay in-lieu fee 11%/10% No 10 Mod >55 or as long as resid 10 Mod 45
Rental: $23.50/SF - only allowed under
extreme hardship. Ownership: $15.90/SF
payable based on City Council criteria
Encinitas
Create on-site units; create offsite units; create ADU's; preserve at-risk units; pay inlieu fee; donate land
10%/15% No 7
10% VL or
15% Low Perpetual 7
10% VL or 15%
Low
45 In-lieu fee is calculated on a project-byproject basis based on the affordability gap.

Rental Development Ownership Development
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; LA Orange SD Ven SB Page 9 of 13

APPENDIX B

INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE, SAN DIEGO, VENTURA & SANTA BARBARA COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period In-Lieu Fee
Rental Development Ownership Development
Fillmore Create on-site units; pay inlieu fee; donate land 15% No 4 20+: 5% ELI
or VL & 10%;
Low 17-19: 2
low + one ELI
or VL; 10-16:
2 low; 5-9:: 1
low
55 4
20+: 5% ELI or VL
& 10%; Low 17-19:
2 low + one ELI or
VL; 10-16: 2 low; 5-
9:: 1 low
Goleta
Create on-site units; create offsite units; donate land, pay inlieu fee; acquisition/rehabilitation.

Income/Affordability trade off
of extremley low and very low
income units to low and
moderate income units in
demonstrated extreme
hardship.
25% -
reduced to
20% with
public
benefit
No 2

2.5% @ ELI +

2.5% @ VL+
5% @ Low +
5% @ Mod +
5% at Above
Mod
In general
45 to 55
years, but
not less
than 30
years
2 2.5% @ ELI + 2.5%
@ VL+ 5% @ Low
+ 5% @ Mod + 5%
at Above Mod
In general 45
to 55 years,
but not less
than 30 years
Equal to the Affordability Gap associated
with providing the requisite number of
affordable units on site within the market
rate project.

Huntington Beach
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee
10% No 3 80% 55 3 120% 45
Sliding Scale: 3 to 30 units. In-Lieu Fee
allowed for projects up to 100 units.

Rental: $3.58 to $35.80/SF Ownership:
$2.54 to $25.36/SF. The per SF
measurement caps at 2,000 SF.

Irvine
Projects with fewer than 50
units can create on-site units;
create off-site units; preserve
or rehab existing housing; pay
in-lieu fee; donate land.

Projects with 50+ units must
produce the affordable units
on site.
15% No 50
50%, 80% &
120%
Defined
credits
30 50 50%, 80% & 120%
Defined credits 30 Calculated per project. Based on an equivalent value calculation La Habra
Create on-site units; create offsite units; pay in-lieu fee; acquisition/rehabilitation.
15% No 10 9% Mod + 6%
VL & Low 55 10 110% 45
Calculated per project. Based on the
estimated construction cost to produce the
unit.

Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; LA Orange SD Ven SB Page 10 of 13

APPENDIX B

INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE, SAN DIEGO, VENTURA & SANTA BARBARA COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period In-Lieu Fee
Rental Development Ownership Development
Long Beach Create on-site units; pay inlieu fee; donate land 11%/10% No 10 50% > of 55 yrs
or as long as
resid
10 120%
> of 55 yrs or
as long as
resid
Rental @ $38.00/SF; Ownership @
$29.10/SF
Oceanside
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land; purchase
credits from another project.
10% No 3 Low 55 3 Mod 55 In-lieu fee paid by right. The fee is set at $8.82/SF.

Oxnard
Create on-site units; create offsite units; pay in-lieu fee in limited circumstances
10% No 10 5% @ VL +
5% Low 55 10 Low 20
Fee charged per total unit in the project. In
2022: SFH $36,000; MF Ownership $35,000;
Rental $28,000
Pasadena
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land
20% No 1
5% @50% +
5% @ 80% +
10% @ 120%
1 110% 45 Sliding scale by sub-area & project size.

Low at $34.19/SF & High at $73.52/SF
Pomona
Create on-site units; create offsite units; pay in-lieu fee; donate land
13% / 7%-
11% Yes 3 120% Perpetual 3 120% 45 Rental @ $9.30/SF; SFH @ $11.40/SF Condominiums @ $9.30/SF Redondo Beach
Create on-site units; created
off-site units; pay in-lieu fee
up to nine units. Fractional
unit obligations are rounded
down
10%-15% /
9%-15% Yes 2 Moderate >75 or as long as resid 2 Mod 55
Sliding scale for 2 to 9 unit projects: Rental:
extrapolated from $34.20/SF of total
project area. Ownership: extrapolated from
$43.20/SF of total project area.

San Buenaventura
(Proposed Update)
Create on-site units; create offsite units; pay in-lieu fee; preserve or rehab existing
housing; donate land
15% / 10% No 7 Low 55 7 Mod 45 Ownership @ $29.80 - $66.30/SF; Apartments @ $20.30 - $48.90/SF
San Diego
Create on-site units; create offsite units; pay in-lieu fee; donate land
10% to 15% No 10 50% or 80% 55 100% or 120% In 2024 the in-lieu fee will be set a $25/SF Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; LA Orange SD Ven SB Page 11 of 13

APPENDIX B

INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE, SAN DIEGO, VENTURA & SANTA BARBARA COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period In-Lieu Fee
Rental Development Ownership Development
San Juan Capistrano
Create on-site units; create offsite units; preserve or rehab existing housing; pay in-lieu
fee; donate land
10% No 2 55 2 55
Based on 90% of the Affordability Gap,
which is updated monthly based on
benchmark market prices
Santa Ana
Only applies to changes in land
use and zoning designations.

Create on-site units; off-site
units; pay in-lieu fee
Rental: 5% -
15% & Own:
5%
No 5
15% @ Low
or 10% @ VL
or 5% @ ELI
or 5% Low +
3% VL +2%
ELI
55 5 120% 55
Fee charged per sf of habitable area: 5-9:
$6.00; 10-14: $9.00; 15-19: $12; 20+: $15.

Discounts for use of skilled and trained
labor force
Santa Barbara (City)
Create on-site units; create offsite units; pay in-lieu fee for 1 to 9 & fractional units; donate
land
10% / 15% No 5 Mod 90 1 120% to 200%
90 / restarts
on each
resale
In 2020 the in-lieu fee for rental projects
was set at $25 per SF. Adjusted annually by
the Engineering News Record (ENR)
Building Cost Index for Los Angeles. In-lieu
fee for ownership units is calculated based
on the median price for 2-bedroom
condos, a low income standard, and the
estimated production cost (sales price -
15% profit). A discount schedule is
provided from small units.

Santa Monica
Create on-site units; create offsite units; pay in-lieu fee; donate land
5% to 30% Yes 2
50%, 80% &
120%
Defined
credits
55 2 50%, 80% & 120%
Defined credits 55 Rental @ $35.70/SF Ownership @ $41.70/SF Santa Paula Create on-site units; create offsite units; pay in-lieu fee 10% to 17% Yes 10 15% Low or 10% VL 55 10 45 In-Lieu Fee is set on a project-by-project basis.

West Hollywood
Create on-site units; create offsite units; pay in-lieu fee for 2- 10 units projects
20% No 2 Low / Mod As long as
resid 2 Low / Mod As long as resid
Sliding scale: 2 Units @ $13.63/SF - 10 Units
@ $29.23/SF
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; LA Orange SD Ven SB Page 12 of 13

APPENDIX B

INCLUSIONARY HOUSING PROGRAM SURVEYS - LOS ANGELES, ORANGE, SAN DIEGO, VENTURA & SANTA BARBARA COUNTIES INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Jurisdiction Compliance Options Set Aside %
On-site %
Varies
Threshold
Project Size % of AMI
Covenant
Period
Threshold
Project Size % of AMI
Covenant
Period In-Lieu Fee
Rental Development Ownership Development
II. Inclusionary Requirements: Ownership Projects Only
Carpinteria
Create on-site units; pay inlieu fee in limited
circumstances
12% No 5 200% 30
In-lieu fee allowed if infeasibility can be
proved. The fee is based on the difference
between the median sales price of
condominiums and/or single family homes
and the affordable price at 121% of AMI
with 30% of income dedicated to housing
expenses
San Clemente
Create on-site units; create offsite units; pay in-lieu fee; donate land; or a combination
recommended by the
Community Development
Director.
4% No 6 50% Based on the Affordability Gap associated
with a prototype 1,100 SF unit.
5-19: 1 Mod. 20+:

South Coast: 2.5%
VL + 2.5% Low +
5% Mod + 5%
Workforce
45 - restarts
up to 90
In-Lieu fee is measured per affordable unit.

Varies by HMA & income / affordability
level. Fee: Very Low & Low are based on
the estimated cost for the County to
subsidize very low & low income units. Cost
of Construction Fee: Moderate &
Workforce are based on the median condo
sales prices minus 15% of the median price
of condos.

Santa Ynez: No
Workforce
2020 Very Low & Low Fees: South Coast
$176,000; Santa Maria $96,600; Santa Ynez
$146,200; Lompoc $99,500
Santa Maria &
Lompoc: 2.5% VL +

2.5 Low
2020 Mod & Workforce Fees: South Coast
$658,000; Santa Maria $248,000; Santa
Ynez $431,600; Lompoc $227,600
III. Inclusionary Requirements: Rental Projects Only
Glendale
Create on-site units; create offsite units; pay in-lieu fee; donate land
15% No 8 60% 55 Sliding scale: 8 Units @ $28.71/SF - 21 Units @ $55/SF
Santa Barbara County
Create on-site units; create offsite units in the coastal zone; pay in-lieu fee for certain unit
types
5% - 15% Yes 5
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 Inclusionary Survey; LA Orange SD Ven SB Page 13 of 13 ATTACHMENT 2

AFFORDABLE HOUSING COST CALCULATION METHODOLOGIES
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Affordable Housing Cost Calculation Methodologies Page 1 Inclusionary Housing: Financial Evaluation December 6, 2022

APPENDIX A

AFFORDABLE SALES PRICE CALCULATION METHODOLOGY
The Affordable Sales Price calculations are based on the following assumptions:

1. The household income information used in the calculations is based on 2022 income statistics for Los Angeles County as a whole. The household incomes for low and moderate income households are produced and distributed annually by the California Department of Housing and Community Development (HCD).

2. The Affordable Sales Price estimates are based on the calculation methodology imposed by California Health and Safety Code (H&SC) Section 50052.5.

The elements included in the Affordable Sales Price calculations are described in the following sections of this Attachment.

HOUSEHOLD SIZE
For the sole purposes of calculating Affordable Sales Prices, H&SC Section 50052.5 sets household sizes based on the number of bedrooms in the home plus one.1 H&SC Section 50052.5 refers to this as “the family size appropriate for the unit.” This is not an occupancy cap; it is a benchmark that creates a consistent Affordable Sales Price calculation methodology.

HOUSEHOLD INCOME
For calculation purposes only, H&SC Section 50052.5 applies benchmark household incomes as the standard for determining the Affordable Sales Prices. These benchmarks are based on the following percentages of the area median income (AMI) for Los Angeles County:

Income Category % of AMI
Moderate 110%
Low 70%
1 For example, the imputed household size for a three-bedroom unit is four persons.

Affordable Housing Cost Calculation Methodologies Page 2 Inclusionary Housing: Financial Evaluation December 6, 2022 The identified benchmark percentages of AMI are not income caps. The household income qualification standards are based on 120% of AMI for moderate income households and 80% of AMI for low income households; both are based on the actual size of the home buyer’s household.

INCOME ALLOCATED TO HOUSING-RELATED EXPENSES
H&SC Section 50052.5 allocates the following percentages of the benchmark household incomes to the payment of housing-related expenses:

Income Category
% of Benchmark
Income
Moderate 35%
Low 30%

HOUSING-RELATED EXPENSES
Based on research undertaken by KMA, the variable housing related expense assumptions used in this analysis are presented in the following table:

Variable Housing Related Expenses
Ownership Housing Development Prototypes
Monthly Utilities
Allowances 2
Monthly HOA,
Insurance &
Maintenance
One-Bedroom Units $198 $350
Two-Bedroom Units $242 $375
Three-Bedroom Units $298 $400
Four-Bedroom Units $369 $425
2 Utilities allowances are based on utilities costs comprised of electric heating, cooking and water heating; basic electric; air conditioning; water; and trash services. The allowances are based on the Los Angeles County Housing Development Authority (LACDA) schedule effective as of July 1, 2022.

Affordable Housing Cost Calculation Methodologies Page 3 Inclusionary Housing: Financial Evaluation December 6, 2022 The property tax expense estimate is based on 1.15% of the home’s estimated Affordable Sales Price.

This assumes that the City will require the homes to be resold to an income qualified household at the then current Affordable Sales Price.

SUPPORTABLE MORTGAGE AMOUNT
The mortgage amounts used in the Affordable Sales Price calculations are estimated using the income available after the other housing-related expenses are paid. The mortgage terms used in this Financial Evaluation were based on a 30-year fully amortizing loan at a 6.04% interest rate. 3

BENCHMARK DOWN PAYMENT
KMA set the benchmark down payment at 5% of the estimated Affordable Sales Price. A down payment of this magnitude is commonly allowed by affordable housing programs. 3 Based on a 100 basis points premium applied to the Freddie Mac monthly average, between December 2021 and November 2022 for a fixed interest rate loan with a 30-year amortization period.

Affordable Housing Cost Calculation Methodologies Page 4 Inclusionary Housing: Financial Evaluation December 6, 2022

APPENDIX B

AFFORDABLE RENT CALCULATION METHODOLOGY
The Affordable Rent calculations are presented in Attachment 3 – Appendix B. The calculations are based on the following assumptions:

1. The household income information used in the calculations is based on 2022 income statistics for Los Angeles County as published annually by HUD and distributed by HCD.

2. The household size appropriate for the unit is based on the H&SC Section 50052.5 standard of the number of bedrooms in the home plus one. As discussed previously, this is a benchmark for calculation purposes only. It is neither an occupancy minimum nor a maximum.

3. The benchmark household incomes used in the analyses are based on the following standards:
a. The modified low income rents are based on 80% of AMI. This percentage of AMI is based on the standard imposed in Assembly Bill 1505.
b. The very low income rents are based on 50% of AMI, which is the standard imposed by H&SC Section 50053.

4. Thirty percent (30%) of defined household income is allocated to housing-related expenses.

5. The following monthly utilities allowances were applied in this analysis.4 Utilities Allowances
Apartment Development
Number of
Bedrooms
Monthly Utilities
Allowances
1 $114
2 $145
4 Utilities allowances are based on utilities costs comprised of electric heating, cooking and water heating; basic electric; and air conditioning. The allowances are based on the LACDA schedule effective as of July 1, 2022.

ATTACHMENT 3

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; ATT 3 Title Page 1 of 42

APPENDIX A

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

HOME SALES SURVEY
Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; App A Titles Page 2 of 42

APPENDIX A

HOME SALES SURVEY

TOWNHOME/CONDOMINIUM UNITS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Unit Size (SF) Total Per SF Year Built
1920 S Pacific Coast #203 Redondo Beach 90277 1,235 $890,000 $721 2018 1920 S Pacific Coast #312 Redondo Beach 90277 1,031 $885,000 $858 2018 214 S Lucia Ave Unit B Redondo Beach 90277 1,576 $950,000 $603 2016 1920 S Pacific Coast Hwy #212 Redondo Beach 90277 869 $787,000 $906 2018 Minimum 869 $787,000 $603 2016
Maximum 1,576 $950,000 $906 2018
Average 1,178 $878,000 $745 2018
6156 Pacific Coast Hwy Redondo Beach 90277 1,198 $935,000 $780 2020 6158 Pacific Coast Hwy Redondo Beach 90277 1,198 $935,000 $780 2020 1920 S Pacific Coast Hwy S #305 Redondo Beach 90277 1,292 $1,099,000 $851 2019 1920 South Pacific Coast Hwy #302 Redondo Beach 90277 1,402 $1,200,000 $856 2018 1827 11th St Manhattan Beach 90266 1,427 $1,410,000 $988 2021 6160 S Pacific Coast Hwy Redondo Beach 90277 1,198 $980,000 $818 2020 1845 11th St Manhattan Beach 90266 1,430 $1,430,000 $1,000 2021 6154 Pacific Coast Hwy Redondo Beach 90277 1,198 $945,000 $789 2020 Minimum 1,198 $935,000 $780 2018
Maximum 1,430 $1,430,000 $1,000 2021
Average 1,293 $1,116,750 $864 2020
521 N Gertruda Ave Unit B Redondo Beach 90277 2,440 $1,825,000 $748 2017 617 Aviation Way Manhattan Beach 90266 1,850 $1,660,000 $897 2022 1843 11th St Manhattan Beach 90266 1,870 $1,679,000 $898 2021 18306 Grevillea Ave Redondo Beach 90278 1,440 $1,115,000 $774 2022 118 S Irena Ave Unit A Redondo Beach 90277 2,550 $1,650,000 $647 2018 1920 Pacific Coast Hwy S #119 Redondo Beach 90277 1,984 $1,300,000 $655 2018 2606 Voorhees Ave Unit B Redondo Beach 90278 2,209 $1,465,000 $663 2016 316 N Francisca Ave Unit B Redondo Beach 90277 2,510 $1,750,000 $697 2019 203 S Prospect Ave Unit A Redondo Beach 90277 2,520 $1,950,000 $774 2014 18308 Grevillea Ave Redondo Beach 90278 1,485 $1,250,000 $842 2022 613 Aviation Way Manhattan Beach 90266 1,850 $1,730,000 $935 2022 1808 Perkins Ln Redondo Beach 90278 2,020 $1,265,000 $626 2013 304 N Catalina Ave Unit A Redondo Beach 90277 2,167 $1,870,000 $863 2020 1829 11th Manhattan Beach 90266 1,828 $1,649,000 $902 2021 1837 Grant Ave Redondo Beach 90278 2,081 $1,679,000 $807 2022 519 N Gertruda Ave Unit B Redondo Beach 90277 2,437 $1,725,000 $708 2019 1825 11th Manhattan Beach 90266 1,812 $1,630,000 $900 2021 2311 Voorhees Ave Unit A Redondo Beach 90278 2,240 $2,175,000 $971 2019 2606 Voorhees Ave Unit A Redondo Beach 90278 2,360 $1,410,000 $597 2016 1847 11th St Manhattan Beach 90266 1,887 $1,679,000 $890 2021 611 Aviation Way Manhattan Beach 90266 1,850 $1,785,000 $965 2022 615 Aviation Way Manhattan Beach 90266 1,850 $1,735,000 $938 2022 1407 S Catalina Ave Unit A Redondo Beach 90277 3,182 $2,550,000 $801 2015 Address
Sales Price
One-Bedroom Units
Two-Bedroom Units
Three-Bedroom Units
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; Home Sales Page 3 of 42

APPENDIX A

HOME SALES SURVEY

TOWNHOME/CONDOMINIUM UNITS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Address Unit Size (SF) Total Per SF Year Built
Sales Price
2207 Harriman Ln Unit A Redondo Beach 90278 2,550 $1,775,000 $696 2017 118 S Irena Ave Unit B Redondo Beach 90277 2,104 $1,650,000 $784 2018 810 Esplanade Unit C Redondo Beach 90277 1,950 $3,150,000 $1,615 2017 Minimum 1,440 $1,115,000 $597 2013
Maximum 3,182 $3,150,000 $1,615 2022
Average 2,116 $1,734,654 $820 2019
1903 Clark Ln Unit B Redondo Beach 90278 2,240 $2,088,000 $932 2019 206 South Helberta Unit A Redondo Beach 90277 2,500 $2,280,000 $912 2017 1903 Camino De La Costa Unit C Redondo Beach 90277 3,000 $3,199,000 $1,066 2021 216 S Lucia Ave Unit A Redondo Beach 90277 2,705 $1,825,000 $675 2021 216 S Lucia Ave Unit C Redondo Beach 90277 2,661 $1,780,000 $669 2021 2119 Grant Ave Unit C Redondo Beach 90278 2,200 $1,785,000 $811 2016 2221 Voorhees Ave Unit A Redondo Beach 90278 2,402 $1,500,000 $624 2012 2216 Bataan Rd Unit A Redondo Beach 90278 2,540 $2,150,000 $846 2022 2309 Clark Ln Unit A Redondo Beach 90278 2,310 $1,550,000 $671 2018 1903 Clark Ln Unit A Redondo Beach 90278 2,240 $2,170,000 $969 2019 1908 Bataan Rd Unit B Redondo Beach 90278 2,540 $1,695,000 $667 2021 1908 Bataan Rd Unit A Redondo Beach 90278 2,540 $1,700,000 $669 2021 1603 Flagler Ln Redondo Beach 90278 2,709 $1,965,000 $725 2022 802 N Catalina Ave Redondo Beach 90277 2,710 $1,550,000 $572 2021 2110 Ernest Ave Unit A Redondo Beach 90278 2,603 $1,710,000 $657 2015 1710 Clark Ln Unit A Redondo Beach 90278 2,508 $2,255,000 $899 2022 707 1st Pl Hermosa Beach 90254 2,510 $2,250,000 $896 2015 2204 Bataan Rd Unit A Redondo Beach 90278 2,460 $1,735,000 $705 2017 206 S Helberta Ave Unit B Redondo Beach 90277 2,498 $2,287,523 $916 2017 112 S Francisca Ave Unit A Redondo Beach 90277 2,514 $2,200,000 $875 2021 530 N Elena Ave Redondo Beach 90277 2,761 $1,600,000 $580 2021 2603 Nelson Ave Unit B Redondo Beach 90278 2,025 $1,325,000 $654 2018 2608 Huntington Ln Unit A Redondo Beach 90278 2,367 $1,795,000 $758 2021 928 S Juanita Ave Unit B Redondo Beach 90277 2,740 $2,200,000 $803 2018 2406 Mathews Ave Unit A Redondo Beach 90278 2,013 $1,469,000 $730 2021 2306 Aviation Blvd Unit A Redondo Beach 90278 2,246 $1,350,000 $601 2021 2119 Marshallfield Ln Unit B Redondo Beach 90278 2,650 $1,939,000 $732 2018 2226 Bataan Unit B Redondo Beach 90278 2,367 $1,795,000 $758 2021 2608 Huntington Ln Unit B Redondo Beach 90278 2,367 $1,790,000 $756 2021 2306 Aviation Blvd Unit B Redondo Beach 90278 1,993 $1,250,000 $627 2021 1905 Huntington Ln Unit B Redondo Beach 90278 2,535 $1,900,000 $750 2016 1905 Huntington Ln Unit A Redondo Beach 90278 2,535 $1,900,000 $750 2016 207 S Irena Ave S Unit A Redondo Beach 90277 2,412 $2,160,000 $896 2017 2016 Perry Ave Unit B Redondo Beach 90278 2,508 $1,800,000 $718 2021 2016 PERRY Ave Unit A Redondo Beach 90278 2,508 $1,800,000 $718 2021 1912 Marshallfield Ln Unit B Redondo Beach 90278 2,487 $1,695,000 $682 2021 1909 Huntington Ln Unit B Redondo Beach 90278 2,500 $1,705,000 $682 2018 2302 Felton Ln Redondo Beach 90278 2,436 $1,900,000 $780 2022 526 N Elena Ave Unit B Redondo Beach 90277 2,650 $1,750,000 $660 2018 1902 Havemeyer Ln Unit B Redondo Beach 90278 2,438 $1,640,000 $673 2021 Four-Bedroom Units
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; Home Sales Page 4 of 42

APPENDIX A

HOME SALES SURVEY

TOWNHOME/CONDOMINIUM UNITS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Address Unit Size (SF) Total Per SF Year Built
Sales Price
1902 Havemeyer Ln Unit A Redondo Beach 90278 2,438 $1,590,000 $652 2021 1912 Marshallfield Ln Unit A Redondo Beach 90278 2,487 $1,695,000 $682 2021 1500 Esplanade Unit i Redondo Beach 90277 2,530 $2,600,000 $1,028 2015 1920 Gates Ave Unit B Redondo Beach 90278 2,600 $1,870,000 $719 2021 528 S Guadalupe Unit A Redondo Beach 90277 2,384 $2,300,000 $965 2022 2700 Vanderbilt Ln Redondo Beach 90278 2,200 $1,320,000 $600 2013 2408 Harriman Ln Unit A Redondo Beach 90278 2,508 $1,585,000 $632 2016 2421 Voorhees Ave Unit A Redondo Beach 90278 2,556 $1,670,000 $653 2021 2516 Harriman Ln Unit B Redondo Beach 90278 2,950 $2,050,000 $695 2018 2206 Harriman Ln Unit A Redondo Beach 90278 2,417 $2,025,000 $838 2016 1710 Clark Unit B Redondo Beach 90278 2,508 $2,350,000 $937 2022 1903 Camino De La Costa Unit B Redondo Beach 90277 3,000 $3,150,000 $1,050 2021 2226 Gates Ave Unit B Redondo Beach 90278 2,530 $1,580,000 $625 2014 2309 Huntington Ln Unit B Redondo Beach 90278 2,367 $1,645,000 $695 2021 2309 Huntington Ln Unit A Redondo Beach 90278 2,367 $1,595,000 $674 2021 1909 Marshallfield Ln Unit A Redondo Beach 90278 2,480 $2,300,000 $927 2022 2013 Voorhees Ave Unit B Redondo Beach 90278 2,600 $1,730,000 $665 2018 2006 Bataan Rd Unit A Redondo Beach 90278 2,405 $1,910,000 $794 2014 212 S Irena Ave Unit A Redondo Beach 90277 2,356 $2,160,000 $917 2017 2114 Carnegie Ln Unit B Redondo Beach 90278 2,207 $1,290,000 $585 2021 2112 Carnegie Ln Unit B Redondo Beach 90278 2,207 $1,300,000 $589 2021 624 N Irena Ave Unit B Redondo Beach 90277 2,680 $2,200,000 $821 2017 2213 Speyer Ln Unit B Redondo Beach 90278 2,544 $2,300,000 $904 2017 2309 Clark Ln Unit B Redondo Beach 90278 2,230 $1,899,000 $852 2017 2017 Huntington Ln Unit B Redondo Beach 90278 2,612 $1,515,000 $580 2013 1905 Speyer Ln Unit A Redondo Beach 90278 2,610 $1,656,000 $634 2012 2108 Harriman Ln Unit B Redondo Beach 90278 2,400 $1,585,000 $660 2015 1104 Vincent St Unit B Redondo Beach 90277 2,688 $1,575,000 $586 2015 2406 Mathews Ave Unit B Redondo Beach 90278 2,013 $1,455,000 $723 2021 2004 Grant Ave Unit A Redondo Beach 90278 2,304 $1,750,000 $760 2018 528 N Elena Ave Redondo Beach 90277 3,045 $1,780,000 $585 2021 2307 Vanderbilt Ln Unit B Redondo Beach 90278 2,078 $1,710,000 $823 2017 804 N Catalina Ave Redondo Beach 90277 2,799 $1,500,000 $536 2021 2003 Gates Ave Unit B Redondo Beach 90278 2,575 $1,900,000 $738 2021 2216 Bataan Rd Unit B Redondo Beach 90278 2,594 $2,150,000 $829 2022 2310 Carnegie Ln Unit B Redondo Beach 90278 2,130 $1,600,000 $751 2018 2003 Gates Ave Unit A Redondo Beach 90278 2,575 $1,900,000 $738 2021 2206 Warfield Ave Unit A Redondo Beach 90278 2,667 $2,220,000 $832 2018 216 S Lucia Ave Unit B Redondo Beach 90277 2,559 $1,730,000 $676 2021 2117 Marshallfield Ln Unit A Redondo Beach 90278 2,662 $1,960,000 $736 2022 2117 Marshallfield Ln Unit B Redondo Beach 90278 2,662 $1,950,000 $733 2022 1914 Marshallfield Ln Unit B Redondo Beach 90278 2,589 $1,599,000 $618 2020 1909 Huntington Ln Unit A Redondo Beach 90278 2,612 $1,920,000 $735 2018 2406 Mathews Ave Unit C Redondo Beach 90278 2,110 $1,479,000 $701 2021 2707 Rockefeller Ln Unit C Redondo Beach 90278 2,320 $1,350,000 $582 2019 2216 Gates Ave Unit B Redondo Beach 90278 3,230 $1,895,000 $587 2021 620 1st Pl Hermosa Beach 90254 2,986 $3,260,000 $1,092 2022 2314 Huntington Ln Unit A Redondo Beach 90278 2,540 $1,930,000 $760 2022 2304 Felton Ln Redondo Beach 90278 2,574 $1,815,000 $705 2022 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; Home Sales Page 5 of 42

APPENDIX A

HOME SALES SURVEY

TOWNHOME/CONDOMINIUM UNITS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Address Unit Size (SF) Total Per SF Year Built
Sales Price
2609 Mathews Ave Unit A Redondo Beach 90278 2,128 $1,350,000 $634 2018 1807 Huntington Ln Unit A Redondo Beach 90278 2,665 $1,800,000 $675 2015 112 S Francisca Ave Unit B Redondo Beach 90277 2,389 $1,960,000 $820 2021 2314 Huntington Ln Unit B Redondo Beach 90278 2,594 $1,900,000 $732 2022 528 S Guadalupe UNIT B Redondo Beach 90277 2,359 $2,025,000 $858 2022 2117 Voorhees Ave Unit A Redondo Beach 90278 2,498 $1,978,000 $792 2022 2520 Nelson Ave Unit C Redondo Beach 90278 1,810 $1,375,000 $760 2017 1608 Phelan Ln Redondo Beach 90278 1,800 $1,420,000 $789 2016 2117 Voorhees Ave Unit B Redondo Beach 90278 2,698 $2,010,000 $745 2022 2421 Voorhees Ave Unit B Redondo Beach 90278 2,556 $1,755,000 $687 2021 1912 Graham Ave Unit B Redondo Beach 90278 2,470 $1,700,000 $688 2012 425 Anita St Unit B Redondo Beach 90278 2,093 $1,625,000 $776 2015 112 S Francisca Ave Unit C Redondo Beach 90277 2,599 $2,050,000 $789 2021 209 S Guadalupe Ave Unit B Redondo Beach 90277 2,604 $1,600,000 $614 2015 2410 Grant Ave Unit A Redondo Beach 90278 2,366 $1,540,000 $651 2018 1933 Gates Ave Unit B Redondo Beach 90278 2,409 $1,485,000 $616 2012 2217 Dufour Ave Unit A Redondo Beach 90278 2,526 $2,100,000 $831 2022 2403 Perkins Redondo Beach 90278 2,100 $1,650,000 $786 2022 2623 Voorhees Ave Redondo Beach 90278 2,150 $1,650,000 $767 2022 Minimum 1,800 $1,250,000 $536 2012
Maximum 3,230 $3,260,000 $1,092 2022
Average 2,474 $1,839,894 $744 2019
Source: Redfin. Based on homes constructed during the past 10 years and sold between March 2021 and November 2022.

Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; Home Sales Page 6 of 42

APPENDIX B

AFFORDABILITY ANALYSES

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; App B Titles Page 7 of 42

APPENDIX B - EXHIBIT I
AFFORDABLE SALES PRICE CALCULATIONS 1

MODERATE INCOME UNITS
2022 INCOME STANDARDS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
One-Bedroom
Units
Two-Bedroom
Units
ThreeBedroom UnitsFour-Bedroom
Units
I. Income Information
Area Median Income $72,900 $82,000 $91,100 $98,400
Benchmark Household Income @ 110% of AMI $80,190 $90,200 $100,210 $108,240 Income Allotted to Housing @ 35% of Income $28,070 $31,570 $35,070 $37,880 II. Expenses
Annual Utilities Allowance 2 $2,376 $2,904 $3,576 $4,428 HOA, Maintenance & Insurance 3 4,200 4,500 4,800 5,100
Property Taxes @ 1.15% of ASP 3,090 3,470 3,830 4,070
Total Expenses $9,666 $10,874 $12,206 $13,598
III. Income Available for Mortgage $18,404 $20,696 $22,864 $24,282 IV. Affordable Sales Price
Supportable Mtg @ 6.04% Interest 4 $254,800 $286,600 $316,600 $336,200 Home Buyer Down Payment @ 5% of ASP 13,400 15,100 16,700 17,700 Affordable Sales Price $268,200 $301,700 $333,300 $353,900 1 2
3 Based in part on the HOA dues identified in the home sales survey. 4 Based on a 100 basis points premium applied to the Freddie Mac monthly average, between December 2021 and November 2022, for a fixed-interest rate loan with a 30-year amortization period.

Based on 2022 Los Angeles County household incomes published by the California Housing & Community Development Department (HCD). The Affordable Sales Price calculations for the Moderate Income units are based on the California Health and Safety Code Utilities allowances are based on the LACDA Single Family Home utility allowance schedule effective as of 7/1/22. Assumes: Electric Heating, Electric Cooking, Electric Water Heater, Basic Electric, Air Conditioning, Water, and Trash.

Prepared by: Keyser Marston Associates
File name: 12 6 22 RB Own Inclusionary; ASP

APPENDIX B - EXHIBIT II
VALUE ESTIMATES: INCLUSIONARY UNITS

APARTMENT UNITS FULFILL THE INCLUSIONARY HOUSING REQUIREMENTS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
One-Bedroom
Units
Two-Bedroom
Units
ThreeBedroom UnitsFour-Bedroom
Units
I. General Assumptions
Area Median Income (AMI) 1 $72,900 $82,000 $91,100 $98,400 Monthly Utilities Allowance $198 $242 $298 $369
HOA, Maintenance & Insurance $350 $375 $400 $425
II. Very Low Income - Rent Based on 50% AMI
A. Benchmark Annual Household Income $36,450 $41,000 $45,550 $49,200 B. Maximum Monthly Rent @ 30% of Household Income $911 $1,025 $1,139 $1,230 C. Gross Annual Rent Income Per Unit $10,935 $12,300 $13,665 $14,760 D. Ongoing Expenses
Annual Utilities Allowance, HOA, Maintenance & Insurance 2 $6,576 $7,404 $8,376 $9,528 Management @ 5% Gross Rent Income 547 615 683 738
Property Taxes @ 1.15% of Restricted Value 713 800 861 841 Total Ongoing Expenses $7,836 $8,819 $9,920 $11,107
E. Stabilized Net Operating Income $3,099 $3,481 $3,745 $3,653 F. Capitalization Rate 5.0% 5.0% 5.0% 5.0%
G. Value Per Very Low Income Unit $62,000 $69,600 $74,900 $73,100 III. Low Income - Rent Based on 60% AMI
A. Benchmark Annual Household Income $43,740 $49,200 $54,660 $59,040 B. Maximum Monthly Rent @ 30% of Household Income $1,094 $1,230 $1,367 $1,476 C. Gross Annual Rent Income Per Unit $13,122 $14,760 $16,398 $17,712 D. Ongoing Expenses
Annual Utilities Allowance, HOA, Maintenance & Insurance 2 $6,576 $7,404 $8,376 $9,528 Management @ 5% Gross Rent Income 656 738 820 886
Property Taxes @ 1.15% of Restricted Value 1,102 1,237 1,347 1,365 Total Ongoing Expenses $8,334 $9,379 $10,543 $11,779
E. Stabilized Net Operating Income $4,788 $5,381 $5,855 $5,933 F. Capitalization Rate 5.0% 5.0% 5.0% 5.0%
G. Value Per Low Income Unit $95,800 $107,600 $117,100 $118,700 1 2 Assumes the landlord pays the utilities costs. The allowances are based on the LACDA Single Family Home utility allowance schedule effective as of 7/1/22. Assumes: Electric Heating, Electric Cooking, Electric Water Heater, Basic Electric, Air Conditioning, Water, and Based on the 2022 Los Angeles County household incomes published by the California Housing & Community Development Department (HCD). The benchmark household size is set at the number of bedrooms in the unit plus one.

Prepared by: Keyser Marston Associates
File name: 12 6 22 RB Own Inclusionary; Aff Value Ests

APPENDIX C

PRO FORMA ANALYSES

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

BASE ZONING PROTOTYPE
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; App C Titles Page 10 of 42

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT I

MARKET RATE ALTERNATIVE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

PRO FORMA ANALYSIS

BASE ZONING PROTOTYPE
Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; PF Mkt Page 11 of 42 APPENDIX C - EXHIBIT I - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MARKET RATE ALTERNATIVE

BASE ZONING PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 87,120 Sf of Land $200 /Sf of Land $17,424,000 II. Direct Costs 2
On-Site Improvements/Landscaping 87,120 Sf of Land $30 /Sf of Land $2,614,000 Parking
Attached Garages 3 35 Spaces $0 /Space 0
At-Grade Spaces 12 Spaces $5,000 /Space 60,000
Building Costs 76,850 Sf of GBA $205 /Sf of GBA 15,754,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 3,686,000 Total Direct Costs $22,114,000
III. Indirect Costs
Architecture, Engineering & Consulting 8.0% Direct Costs $1,769,000 Public Permits & Fees 5 35 Units $40,000 /Unit 1,400,000 Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 442,000 Marketing 35 Units $5,000 /Unit 175,000
Developer Fee 3.0% Gross Sales Revenue 1,767,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 278,000 Total Indirect Costs $5,831,000
IV. Financing Costs
Interest During Construction 6 $2,184,000
Loan Origination Fees 60.0% Loan to Cost 2.5 Points 681,000 Total Financing Costs $2,865,000
V. Total Construction Cost 35 Units $880,000 /Unit $30,810,000 Total Development Cost 35 Units $1,378,000 /Unit $48,234,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 Assumes that the cost for the attached garages is included in the building costs. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Assumes a 6.0% interest cost for debt; an 18 month construction period; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 2.5 points for loan origination fees.

Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; PF Mkt Page 12 of 42 APPENDIX C - EXHIBIT I - TABLE 2

PROJECTED NET SALES REVENUE

MARKET RATE ALTERNATIVE

BASE ZONING PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Sales Revenue 1
One-Bedroom Units 2 Units @ $880,000 /Unit $1,760,000
Two-Bedroom Units 4 Units @ $1,123,000 /Unit 4,492,000
Three-Bedroom Units 7 Units @ $1,738,000 /Unit 12,166,000 Four-Bedroom Units 22 Units @ $1,840,000 /Unit 40,480,000 Total Gross Sales Revenue $58,898,000
II. Cost of Sales
Commissions 3.0% Gross Sales Revenue $1,767,000
Closing 2.0% Gross Sales Revenue 1,178,000
Warranty 0.5% Gross Sales Revenue 294,000
Total Cost of Sales ($3,239,000)
III. Net Revenue $55,659,000
1 Based in part on a sales survey undertaken by KMA in November 2022. See APPENDIX A. The weighted average sales price equates to $766 per square foot of saleable area.

Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; PF Mkt Page 13 of 42 APPENDIX C - EXHIBIT I - TABLE 3

PROJECTED DEVELOPER PROFIT

MARKET RATE ALTERNATIVE

BASE ZONING PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Net Revenue See APPENDIX C - EXHIBIT I - TABLE 2 $55,659,000 II. Total Development Cost See APPENDIX C - EXHIBIT I - TABLE 1 $48,234,000 III. Developer Profit 15.4% Total Development Cost $7,425,000 Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; PF Mkt Page 14 of 42

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT BASE ZONING PROTOTYPE

PRO RATA WITH THE BEDROOM MIX IN THE PROJECT

INPUTS IN RED ARE EXTRACTED FROM THE GENERAL INPUT SHEET

INPUTS IN ORANGE NEED TO BE MODIFIED WHEN COPYING SHEETS TO MAKE NEW SCENARIOS

INPUTS IN BLUE ARE NUMBERS/TEXT

INPUTS IN BLACK ARE FORMULAS

INPUTS IN PINK ARE EXTRACTED FROM OTHER SHEETS

INPUTS IN GREEN ARE ITERATIONS
Total Units 35 Units
Market Rate Units 33
Moderate Income Units 2
Land Area 87,120
Property Acquisition Costs 200
On-Site Improvements/Landscaping 30
Gross Building Area (Sf) 76,850 Sf of GBA
Building Costs 205
Parking 47 Spaces
Attached Garages 0 35 Spaces
At-Grade Spaces 5,000 12 Spaces
Podium Spaces 20,000 0 Spaces
1st Level Subterranean 35,000 0 Spaces
2nd Level Subterranean 45,000 0 Spaces
Marketing 5,000 /Unit 175,000
Financing Costs
Loan Origination Fees 60% of Cost 2.5%
Interest During Construction 3.6%
Loan Interest 60.0% of Cost 6.0%
Equity Interest 40.0% of Cost 0%
Gross Sales Revenue
Unit Mix
One-Bedroom Units 2 Units
Two-Bedroom Units 4 Units
Three-Bedroom Units 7 Units
Four-Bedroom Units 22 Units
Units Sf
Market Rate Units
One-Bedroom Units 2 1,180 880,000
Two-Bedroom Units 4 1,300 1,123,000
Three-Bedroom Units 7 2,120 1,738,000
Four-Bedroom Units 20 2,475 1,840,000
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Weighted Average Price Per Square Foot 768
Weighted Average Price Per Market Rate Unit 1,673,273
Moderate Income Units
One-Bedroom Units 0 1,180 268,200
Two-Bedroom Units 0 1,300 301,700
Three-Bedroom Units 0 2,120 333,300
Four-Bedroom Units 2 2,475 353,900
Weighted Average Price Per Income Restricted Unit 353,900 Inclusionary Units 2 2
Total Units 35 35
Property Acquisition Cost Reduction 15% 15% 30%
Developer Profit 10.1% 15.4% 35%
% Price Increase to Offset Impact 4.6%
Inclusionary Housing Percentage 7.0% MODERATE INCOME UNITS Absorption - Market Rate Units
Presales 30%
Units 6 /Month
Absorption - Affordable Units 6 /Month
Developer Profit Footnote Based on the profit as a percentage of Total Development Cost estima MARKET RATE ALTERNATIVE.

Indirect Costs
Architecture, Engineering & Consulting 8% Direct Costs 1,769,000 Public Permits & Fees 40,000 /Unit
Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 442,000 Developer Fee 50,486 /Unit 1,767,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 278,000 Cost of Sales
Commissions 3% Gross Sales Revenue
Closing 2% Gross Sales Revenue
Warranty 1% Gross Sales Revenue
Construction Period 18 Months
Absorption Period 5 Months
Total Con + Absorption Period 23 Months
Cost Schedules
Month Site / A&E Public Permits & Fees Parking
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 1 50% 50%
2 50% 50%
3 5%
4 5%
5 5%
6 5%
7 10%
8 10%
9 10%
10 10%
11 10%
12 10%
13 5.0%
14 5.0%
15 5.0%
16 5.0%
17 18
Total 100.0% 100.0% 100.0%
Month Site / A&E Public Permits & Fees Parking
1 2,191,500 700,000 0
2 2,191,500 700,000 0
3 0 0 3,000
4 0 0 3,000
5 0 0 3,000
6 0 0 3,000
7 0 0 6,000
8 0 0 6,000
9 0 0 6,000
10 0 0 6,000
11 0 0 6,000
12 0 0 6,000
13 0 0 3,000
14 0 0 3,000
15 0 0 3,000
16 0 0 3,000
17 0 0 0
18 0 0 0
Total 4,383,000 1,400,000 60,000
Construction Maret Rate Units Affordable Units
Month Costs Absorbed Absorbed
Cost/Revenue Phasin
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 0 1 2,891,500 0 0
2 2,891,500 0 0
3 1,099,350 0 0
4 1,099,350 0 0
5 1,099,350 0 0
6 1,099,350 0 0
7 1,102,350 0 0
8 1,102,350 0 0
9 1,102,350 0 0
10 1,102,350 0 0
11 2,198,700 0 0
12 2,198,700 0 0
13 2,195,700 0 0
14 2,195,700 0 0
15 1,099,350 0 0
16 1,099,350 0 0
17 1,183,850 0 0
18 1,183,850 0 0
19 10 1
20 6 1
21 6 0
22 6 0
23 5 0
24 0 0
25 0 0
26 0 0
27 0 0
28 0 0
29 0 0
30 0 0
31 0 0
32 0 0
33 0 0
Total 27,945,000 33 2
Beginning
Month Balance Land Const Cost
1 14,810,400 2,891,500
2 18,020,534 2,891,500
3 21,018,143 1,099,350
4 22,200,336 1,099,350
5 23,386,075 1,099,350
6 24,575,371 1,099,350
7 25,768,236 1,102,350
8 26,967,733 1,102,350
9 28,170,828 1,102,350
10 29,377,533 1,102,350
11 30,587,858 2,198,700
12 32,917,898 2,198,700
13 35,254,928 2,195,700
14 37,595,916 2,195,700
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 15 39,943,926 1,099,350
16 41,182,896 1,099,350
17 42,425,583 1,183,850
18 43,758,019 1,183,850
19 45,094,453 0
20 29,082,873 0
21 19,348,230 0
22 9,918,818 0
23 461,118 0
24 0 0
25 0 0
26 0 0
27 0 0
28 0 0
29 0 0
30 0 0
31 0 0
32 0 0
33 0 0
Total 14,810,400 27,945,000
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Cost Summary
On-Site Improvem
Parking
Building Costs
Contractor/DC Con
Total Direct Costs
Architecture, Engi
Public Permits & F
Misc Indirect Costs
Marketing/Leasing
Total Indirect Cost
Total Financing Co
Total Construction
Bottom Line
Points
/Unit
/Unit
/Unit
/Unit
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 /Sf
/Unit
Crosschecks
These two numbers should be the same
These two numbers should be the same
Goal is the set discount. Iteration needs to match the Actual.

Threshold Developer Profit
ted to be generated by the
Shell / Contractor Misc Indirects Models / Mktg
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 5% 5%
5% 5%
5% 5%
5% 5%
5% 5%
5% 5%
5% 5%
5% 5%
10% 10%
10% 10%
10% 10%
10% 10%

5.0% 5%

5.0% 5%

5.0% 5% 50%

5.0% 5% 50%
100.0% 100.0% 100.0%
Shell / Contractor Misc Indirects Models / Mktg Total Cost / Unit 0 0 0 2,891,500 82,614
0 0 0 2,891,500 82,614
972,000 124,350 0 1,099,350 31,410
972,000 124,350 0 1,099,350 31,410
972,000 124,350 0 1,099,350 31,410
972,000 124,350 0 1,099,350 31,410
972,000 124,350 0 1,102,350 31,496
972,000 124,350 0 1,102,350 31,496
972,000 124,350 0 1,102,350 31,496
972,000 124,350 0 1,102,350 31,496
1,944,000 248,700 0 2,198,700 62,820
1,944,000 248,700 0 2,198,700 62,820
1,944,000 248,700 0 2,195,700 62,734
1,944,000 248,700 0 2,195,700 62,734
972,000 124,350 0 1,099,350 31,410
972,000 124,350 0 1,099,350 31,410
972,000 124,350 87,500 1,183,850 33,824
972,000 124,350 87,500 1,183,850 33,824
19,440,000 2,487,000 175,000 27,945,000 798,429
Absorption
Revenues Period
Cost Cash Flow
ng
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
17,086,627 1
10,393,536 1
10,039,636 1
10,039,636 1
8,366,364 1
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
55,925,800 5
Financing Com/Clsg Residential Retail
Interest Fees Warranty Sales Sale
$53,106 $265,529 $0 $0
62,736 43,373 0 0
66,352 16,490 0 0
69,899 16,490 0 0
73,456 16,490 0 0
77,024 16,490 0 0
80,612 16,535 0 0
84,210 16,535 0 0
87,820 16,535 0 0
91,440 16,535 0 0
98,360 32,981 0 0
105,350 32,981 0 0
112,352 32,936 0 0
119,375 32,936 0 0
Cash Flow Projection
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 123,130 16,490 0 0
126,847 16,490 0 0
130,828 17,758 0 0
134,826 17,758 0 0
135,283 0 939,765 17,086,627
87,249 0 571,645 10,393,536
58,045 0 552,180 10,039,636
29,756 0 552,180 10,039,636
1,383 0 460,150 8,366,364
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
2,009,438 641,331 3,075,919 55,925,800 0
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 2,614,000
60,000
15,754,000
3,686,000
22,114,000 22,114,000
1,769,000
1,400,000
2,487,000
175,000
5,831,000
2,650,769

DIFFERENCE
30,595,769 30,595,000 769
4,829,231 4,830,000 (769)
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Construction
Period
1 1
1 1
1 1
1 1
1 1
1 1
1 1
1 1
1 1
18 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Developer Ending
Profit Balance
$0 18,020,534
0 21,018,143
0 22,200,336
0 23,386,075
0 24,575,371
0 25,768,236
0 26,967,733
0 28,170,828
0 29,377,533
0 30,587,858
0 32,917,898
0 35,254,928
0 37,595,916
0 39,943,926
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 0 41,182,896
0 42,425,583
0 43,758,019
0 45,094,453
0 29,082,873
0 19,348,230
0 9,918,818
0 461,118
7,443,712 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
0 0
7,443,712 0
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Own Inclusionary; I Mod PR; 12/6/2022 INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT III

PRO FORMA ANALYSIS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT

UNITS IN THE PROJECT WITH THE FEWEST NUMBER OF BEDROOMS Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; Pf Mod SM Page 34 of 42 APPENDIX C - EXHIBIT III - TABLE 1

ESTIMATED DEVELOPMENT COSTS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 87,120 Sf of Land $200 /Sf of Land $17,424,000 II. Direct Costs 2
On-Site Improvements/Landscaping 87,120 Sf of Land $30 /Sf of Land $2,614,000 Parking
Attached Garages 3 35 Spaces $0 /Space 0
At-Grade Spaces 12 Spaces $5,000 /Space 60,000
Building Costs 76,850 Sf of GBA $205 /Sf of GBA 15,754,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 3,686,000 Total Direct Costs $22,114,000
III. Indirect Costs
Architecture, Engineering & Consulting 8.0% Direct Costs $1,769,000 Public Permits & Fees 5 35 Units $40,000 /Unit 1,400,000 Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 442,000 Marketing 35 Units $5,000 /Unit 175,000
Developer Fee 6 35 Units $50,486 /Unit 1,767,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 278,000 Total Indirect Costs $5,831,000
IV. Financing Costs
Interest During Construction 7 $2,020,000
Loan Origination Fees 60.0% Loan to Cost 2.5 Points 644,000 Total Financing Costs $2,664,000
V. Total Construction Cost 35 Units $875,000 /Unit $30,609,000 Total Development Cost 35 Units $1,372,000 /Unit $48,033,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 Assumes that the cost for the attached garages is included in the building costs. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on the Developer Fee per unit generated by the MARKET RATE ALTERNATIVE 7 Assumes a 6.0% interest cost for debt; an 18 month construction period; a 5 month absorption period; 30% of the units are presold and close during first month after completion; and 2.5 points for loan origination fees.

Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; Pf Mod SM Page 35 of 42 APPENDIX C - EXHIBIT III - TABLE 2

PROJECTED NET SALES REVENUE

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Sales Revenue
Market Rate Units 1
One-Bedroom Units 0 Units @ $880,000 /Unit $0
Two-Bedroom Units 2 Units @ $1,123,000 /Unit $2,246,000 Three-Bedroom Units 7 Units @ $1,738,000 /Unit 12,166,000 Four-Bedroom Units 22 Units @ $1,840,000 /Unit 40,480,000 Moderate Income Units 2
One-Bedroom Units 2 Units @ $268,200 /Unit 536,000
Two-Bedroom Units 2 Units @ $301,700 /Unit 603,000
Three-Bedroom Units 0 Units @ $333,300 /Unit 0
Four-Bedroom Units 0 Units @ $353,900 /Unit 0
Total Gross Sales Revenue $56,031,000
II. Cost of Sales
Commissions 3.0% Gross Sales Revenue $1,681,000
Closing 2.0% Gross Sales Revenue 1,121,000
Warranty 0.5% Gross Sales Revenue 280,000
Total Cost of Sales ($3,082,000)
III. Net Revenue $52,949,000
1 2 See APPENDIX B - EXHIBIT I.

Based in part on a sales survey undertaken by KMA in November 2022. See APPENDIX A. The weighted average sales price equates to $764 per square foot of saleable area.

Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; Pf Mod SM Page 36 of 42 APPENDIX C - EXHIBIT III - TABLE 3

INCLUSIONARY HOUSING IMPACTS

BASE ZONING PROTOTYPE

MODERATE INCOME INCLUSIONARY HOUSING COMPONENT

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Funds Available for Development Costs
Net Revenue See APPENDIX C - EXHIBIT III - TABLE 2 $52,949,000 (Less) Threshold Developer Profit 1 15.4% Total Development Cost ($7,394,000) Total Funds Available for Development Costs $45,555,000 II. Total Development Cost See APPENDIX C - EXHIBIT III - TABLE 1 $48,033,000 III. Total Financial Impact ($2,478,000)
Property Acquisition Cost Reduction 14% of Estimated Current Acquisition Prices Developer Profit 10.2% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 4.5% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the MARKET RATE ALTERNATIVE.

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REDONDO BEACH, CALIFORNIA

APPENDIX D

PRO FORMA ANALYSES

STATE DENSITY BONUS PROTOTYPE

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
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File name: 12 6 22 RB Own Inclusionary; App D Titles Page 38 of 42 INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

OWNERSHIP HOUSING DEVELOPMENT

APPENDIX D

PRO FORMA ANALYSIS

INCLUSIONARY HOUSING COMPONENT - VERY LOW INCOME APARTMENTS

STATE DENSITY BONUS PROTOTYPE
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File Name: 12 6 22 RB Own Inclusionary; Pf DB VL Page 39 of 42 APPENDIX D - TABLE 1

ESTIMATED DEVELOPMENT COSTS

STATE DENSITY BONUS PROTOTYPE

INCLUSIONARY HOUSING COMPONENT - VERY LOW INCOME APARTMENTS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 87,120 Sf of Land $200 /Sf of Land $17,424,000 II. Direct Costs 2
On-Site Improvements/Landscaping 87,120 Sf of Land $30 /Sf of Land $2,614,000 Parking 3 48 Spaces $0 /Space 0
Building Costs 106,785 Sf of GBA $205 /Sf of GBA 21,891,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 4,901,000 Total Direct Costs $29,406,000
III. Indirect Costs
Architecture, Engineering & Consulting 8.0% Direct Costs $2,352,000 Public Permits & Fees 5 48 Units $40,000 /Unit 1,920,000 Taxes, Insurance, Legal & Accounting 2.0% Direct Costs 588,000 Marketing 48 Units $5,000 /Unit 240,000
Developer Fee 6 48 Units $51,125 /Unit 2,454,000
Soft Cost Contingency Allowance 5.0% Other Indirect Costs 378,000 Total Indirect Costs $7,932,000
IV. Financing Costs
Interest During Construction 7 $2,496,000
Loan Origination Fees 60.0% Loan to Cost 2.5 Points 806,000 Total Financing Costs $3,302,000
V. Total Construction Cost 48 Units $847,000 /Unit $40,640,000 Total Development Cost 48 Units $1,210,000 /Unit $58,064,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on the Developer Fee per unit generated by the MARKET RATE ALTERNATIVE 7 Assumes a 6.0% interest cost for debt; an 18 month construction period; a 6 month absorption period; 30% of the units are presold and close during first month after completion; and 2.5 points for loan origination fees.

Assumes that the cost for the attached garages is included in the building costs. In accordance with Government Code Section 65915 (p) no guest spaces are required.

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PROJECTED NET SALES REVENUE

STATE DENSITY BONUS PROTOTYPE

INCLUSIONARY HOUSING COMPONENT - VERY LOW INCOME APARTMENTS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Sales Revenue
A. Market Rate Units 1
One-Bedroom Units 2 Units @ $880,000 /Unit $1,760,000
Two-Bedroom Units 5 Units @ $1,123,000 /Unit 5,615,000
Three-Bedroom Units 8 Units @ $1,738,000 /Unit 13,904,000 Four-Bedroom Units 26 Units @ $1,840,000 /Unit 47,840,000 B. Inclusionary Units
Very Low Income Density Bonus Units 2
One-Bedroom Units 0 Units @ $62,000 /Unit 0
Two-Bedroom Units 0 Units @ $69,600 /Unit 0
Three-Bedroom Units 1 Unit @ $74,900 /Unit 75,000
Four-Bedroom Units 3 Units @ $73,100 /Unit 219,000
Inclusionary Units 3
One-Bedroom Units 0 Units @ $95,800 /Unit 0
Two-Bedroom Units 0 Units @ $107,600 /Unit 0
Three-Bedroom Units 1 Unit @ $117,100 /Unit 117,000
Four-Bedroom Units 2 Units @ $118,700 /Unit 237,000
Total Gross Sales Revenue $69,767,000
II. Cost of Sales
Commissions 3.0% Gross Sales Revenue $2,093,000
Closing 2.0% Gross Sales Revenue 1,395,000
Warranty 0.5% Gross Sales Revenue 349,000
Total Cost of Sales ($3,837,000)
III. Net Revenue $65,930,000
1 2
3 Under Section 65915 (f) (2), 11% of the Base Units are set aside for very-low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B - EXHIBIT II for the valuation estimates.

The balance of the affordable units are set aside for very low income households. Under Section 50053, the very low income rent calculations are based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B - EXHIBIT II for the valuation estimates.

Based in part on a sales survey undertaken by KMA in November 2022. See APPENDIX A. The weighted average sales price equates to $767 per square foot of saleable area.

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File Name: 12 6 22 RB Own Inclusionary; Pf DB VL Page 41 of 42 APPENDIX D - TABLE 3

INCLUSIONARY HOUSING IMPACTS

STATE DENSITY BONUS PROTOTYPE

INCLUSIONARY HOUSING COMPONENT - VERY LOW INCOME APARTMENTS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Funds Available for Development Costs
Net Revenue See APPENDIX D - TABLE 2 $65,930,000
(Less) Threshold Developer Profit 1 15.4% Total Development Cost ($8,938,000) Total Funds Available for Development Costs $56,992,000 II. Total Development Cost See APPENDIX D - TABLE 1 $58,064,000 III. Total Financial Impact ($1,072,000)
Property Acquisition Cost Reduction 6% of Estimated Current Acquisition Prices Developer Profit 13.5% Based on Estimated Current Property Acquisition Costs % Price Increase to Offset Impact 1.6% Market Rate Units 1 Based on the profit as a percentage of Total Development Cost estimated to be generated by the BASE ZONING PROTOTYPE: MARKET RATE ALTERNATIVE.

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File Name: 12 6 22 RB Own Inclusionary; Pf DB VL Page 42 of 42 ATTACHMENT 4

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
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File name: 12 6 22 RB Rent Inclusionary; ATT 4 TITLE Page 1 of 44

APPENDIX A

RENT SURVEY
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

APARTMENT DEVELOPMENT
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File name: 12 6 22 RB Rent Inclusionary; App A Titles Page 2 of 44

APPENDIX A
RENT SURVEY - 3 & 4 STAR PROPERTIES

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Name Address City # of Units
Unit Size
(SF) Total Per SF Year Built
Crystal Cove 211 Yacht Club Way Redondo Beach 64 361 $2,236 $6.19 1969 Sea Haven Resort Apartments 1718 Esplanade Redondo Beach 3 400 $2,801 $7.00 1969/2021 Ocean Club 300 The Village Dr Redondo Beach 58 517 $3,678 $7.11 1972 Apartments at King Harbor 835 Hopkins Way Redondo Beach 3 595 $3,003 $5.05 1970 Elements 616 616 Esplanade Redondo Beach 16 618 $3,040 $4.92 1971 Minimum 361 $2,236 $4.92
Maximum 618 $3,678 $7.11
Weighted Average 458 $2,934 $6.42
Heritage Pointe 1801 Aviation Way Redondo Beach 68 540 $2,158 $4.00 1990/2019 Seasons at Redondo Beach 109 S Francisca Ave Redondo Beach 130 540 $2,138 $3.96 1996 1113 Barbara St Redondo Beach 22 580 $3,011 $5.19 1968
2100 Perkins Ln Redondo Beach 8 600 $1,815 $3.03 1971
Ocean Club 300 The Village Dr Redondo Beach 216 680 $3,053 $4.49 Sea Haven Resort Apartments 1718 Esplanade Redondo Beach 51 700 $3,302 $4.72 Oceanside Apartments 351 Palos Verde Blvd Redondo Beach 20 700 $1,974 $2.82 Elements 616 616 Esplanade Redondo Beach 68 718 $3,409 $4.75 Beachbrook Village Apartments 420 S. Catalina Avenue Redondo Beach 9 725 $2,607 $3.60 1971 Sugarhill Apartments 1811 Armour Ln Redondo Beach 14 750 $2,010 $2.68 King Harbor 208 Yacht Club Way Redondo Beach 17 750 $2,631 $3.51 1965 Apartments at King Harbor 835 Hopkins Way Redondo Beach 39 792 $3,893 $4.92 Crystal Cove 211 Yacht Club Way Redondo Beach 34 848 $3,394 $4.00 Ocean Gate Towers 1200 S Catalina Ave Redondo Beach 13 900 $2,423 $2.69 1966 Riviera Coast 129-131 Palos Verdes Redondo Beach 4 1,072 $3,817 $3.56 2009 Minimum 540 $1,815 $2.68
Maximum 1,072 $3,893 $5.19
Weighted Average 667 $2,826 $4.24
Average Effective Rent
Studio Units
One-Bedroom Units
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File name: 12 6 22 RB Rent Inclusionary Page 3 of 44

APPENDIX A
RENT SURVEY - 3 & 4 STAR PROPERTIES

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Name Address City # of Units
Unit Size
(SF) Total Per SF Year Built
Average Effective Rent
Heritage Pointe 1801 Aviation Way Redondo Beach 67 740 $2,509 $3.39 Crystal Cove 211 Yacht Club Way Redondo Beach 63 766 $3,352 $4.38 Seasons at Redondo Beach 109 S Francisca Ave Redondo Beach 20 773 $2,443 $3.16 2100 Perkins Ln Redondo Beach 8 800 $2,186 $2.73
Elements 616 616 Esplanade Redondo Beach 21 947 $3,786 $4.00 Ocean Club 300 The Village Dr Redondo Beach 58 1,067 $4,804 $4.50 Ten Ten 1010 Esplanade Redondo Beach 24 1,078 $2,799 $2.60 1958 233 S Juanita Ave Redondo Beach 18 1,100 $2,617 $2.38 1970 Beachbrook Village Apartments 420 S. Catalina Avenue Redondo Beach 86 1,100 $2,748 $2.50 Sea Haven Resort Apartments 1718 Esplanade Redondo Beach 8 1,150 $4,003 $3.48 Sugarhill Apartments 1811 Armour Ln Redondo Beach 4 1,150 $2,265 $1.97 Apartments at King Harbor 835 Hopkins Way Redondo Beach 7 1,269 $5,060 $3.99 Riviera Coast 129-131 Palos Verdes Redondo Beach 19 1,274 $4,413 $3.46 Ocean Gate Towers 1200 S Catalina Ave Redondo Beach 33 1,400 $3,092 $2.21 Minimum 740 $2,186 $1.97
Maximum 1,400 $5,060 $4.50
Weighted Average 997 $3,249 $3.34
Source: CoStar, November 2022
Two-Bedroom Units
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File name: 12 6 22 RB Rent Inclusionary Page 4 of 44

APPENDIX B

APARTMENT DEVELOPMENT

AFFORDABLE RENT CALCULATIONS
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
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File name: 12 6 22 RB Rent Inclusionary; App B Titles Page 5 of 44

APPENDIX B

AFFORDABLE RENT CALCULATIONS
2022 INCOME STANDARDS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
One-Bedroom
Units
Two-Bedroom
Units
I. General Assumptions
Area Median Income (AMI) 1 $72,900 $82,000
Monthly Utilities Allowance 2 $114 $145
II. Affordable Rent Calculations 3
A. Very Low Income - Rent Based on 50% AMI
Benchmark Annual Household Income $36,450 $41,000
Percentage of Income Allotted to Housing Expenses 30% 30% Monthly Income Available for Housing Expenses $911 $1,025 (Less) Monthly Utilities Allowance (114) (145)
Maximum Allowable Rent $797 $880
B. Modified Low Income - Rent Based on 80% AMI
Benchmark Annual Household Income $58,320 $65,600
Percentage of Income Allotted to Housing Expenses 30% 30% Monthly Income Available for Housing Expenses $1,458 $1,640 (Less) Monthly Utilities Allowance (114) (145)
Maximum Allowable Rent $1,344 $1,495
C. Moderate Income - Rent Based on 110% AMI
Benchmark Annual Household Income $80,190 $90,200
Percentage of Income Allotted to Housing Expenses 30% 30% Monthly Income Available for Housing Expenses $2,005 $2,255 (Less) Monthly Utilities Allowance (114) (145)
Maximum Allowable Rent $1,891 $2,110
1 2
3 Based on the 2022 Los Angeles County household incomes published by the California Housing & Community Development Department (HCD). The benchmark household size is set at the number of bedrooms in the unit plus one.

Based on the LACDA Multifamily utility allowance schedule effective as of 7/1/22. Assumes: Electric Heating, Electric Cooking, and Electric Water Heater; Basic Electric; and Air Conditioning.

The Very Low Income and Moderate Income rents are based on the California Health & Safety Code Section 50053 calculation methodology. The Modified Low Income rents are based on 80% of AMI.

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File name: 12 6 22 RB Rent Inclusionary; Aff Rent Page 6 of 44

APPENDIX C

PRO FORMA ANALYSES
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

APARTMENT DEVELOPMENT

SMALL PROJECT PROTOTYPE
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REDONDO BEACH, CALIFORNIA

PRO FORMA ANALYSIS

MARKET RATE ALTERNATIVE

APPENDIX C - EXHIBIT I

APARTMENT DEVELOPMENT
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
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File name: 12 6 22 RB Rent Inclusionary; PF SM Mkt Page 8 of 44 APPENDIX C - EXHIBIT I - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MARKET RATE ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $200 /Sf of Land $2,500,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $180 /Sf of GBA 2,400,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 626,000 Total Direct Costs 13,333 Sf of GBA $282 /Sf of GBA $3,754,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $225,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 75,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 188,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 45,000 Total Indirect Costs $943,000
IV. Financing Costs
Interest During Construction
Land 6 $2,500,000 Cost 6.0% Avg Rate $188,000
Construction 7 $5,187,000 Cost 6.0% Avg Rate 233,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 69,000 Total Financing Costs $490,000
V. Total Construction Cost 10 Units $519,000 /Unit $5,187,000 Total Development Cost 10 Units $769,000 /Unit $7,687,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on a 15 month construction period and a 60% average outstanding loan balance. 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

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File name: 12 6 22 RB Rent Inclusionary; PF SM Mkt Page 9 of 44 APPENDIX C - EXHIBIT I - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MARKET RATE ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 10 Units @ $4,502 /Unit/Month 540,280 B. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $543,280
Vacancy & Collection Allowance 5% Gross Income (27,160) II. Effective Gross Income $516,120
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $9,600 /Unit 95,600
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses ($142,100)
IV. Stabilized Net Operating Income $374,020
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.50 per square foot of leasable area.

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File name: 12 6 22 RB Rent Inclusionary; PF SM Mkt Page 10 of 44 APPENDIX C - EXHIBIT I - TABLE 3

ESTIMATED DEVELOPER RETURN

MARKET RATE ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Stabilized Net Operating Income See APPENDIX C - EXHIBIT I - TABLE 2 $374,020 II. Total Development Cost See APPENDIX C - EXHIBIT I - TABLE 1 $7,687,000 III. Stabilized Return on Total Investment 4.87%
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REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT II

PRO FORMA ANALYSIS

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

APARTMENT DEVELOPMENT
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File name: 12 6 22 RB Rent Inclusionary; PF SM VL Page 12 of 44 APPENDIX C - EXHIBIT II - TABLE 1

ESTIMATED DEVELOPMENT COSTS

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $200 /Sf of Land $2,500,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $180 /Sf of GBA 2,400,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 626,000 Total Direct Costs 13,333 Sf of GBA $282 /Sf of GBA $3,754,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $225,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 75,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 188,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 45,000 Total Indirect Costs $943,000
IV. Financing Costs
Interest During Construction
Land 6 $2,474,800 Cost 6.0% Avg Rate $186,000
Construction 7 $5,185,000 Cost 6.0% Avg Rate 233,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 69,000 Total Financing Costs $488,000
V. Total Construction Cost 10 Units $519,000 /Unit $5,185,000 Total Development Cost 10 Units $769,000 /Unit $7,685,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $25,200 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 12 6 22 RB Rent Inclusionary; PF SM VL Page 13 of 44 APPENDIX C - EXHIBIT II - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 9.5 Units @ $4,502 /Unit/Month 513,270 B. Very Low Income Units 2
One-Bedroom Units 0 Units @ $797 /Unit/Month 0
Two-Bedroom Units 0.5 Units @ $880 /Unit/Month 5,280
C. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $521,550
Vacancy & Collection Allowance 5% Gross Income (26,080) II. Effective Gross Income $495,470
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $9,100 /Unit 91,400
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses 10 Units @ $13,790 /Unit ($137,900) IV. Stabilized Net Operating Income $357,570
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.50 per square foot of leasable area. 2 Under Section 50053, the very low income rent calculations are based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 12 6 22 RB Rent Inclusionary; PF SM VL Page 14 of 44 APPENDIX C - EXHIBIT II - TABLE 3

INCLUSIONARY HOUSING IMPACTS

VERY LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT II - TABLE 2 $357,570 Threshold Return on Total Investment 1 4.9%
Total Supportable Investment $7,349,000
II. Total Development Cost See APPENDIX C - EXHIBIT II - TABLE 1 $7,685,000 III. Total Financial Impact ($336,000)
Property Acquisition Cost Reduction 13% of Estimated Current Acquisition Prices Stabilized Return on Total Investment 4.7% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.2% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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APPENDIX C - EXHIBIT III

MODIFIED LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA

PRO FORMA ANALYSIS

APARTMENT DEVELOPMENT
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File name: 12 6 22 RB Rent Inclusionary; PF SM ML Page 16 of 44 APPENDIX C - EXHIBIT III - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MODIFIED LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $200 /Sf of Land $2,500,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $180 /Sf of GBA 2,400,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 626,000 Total Direct Costs 13,333 Sf of GBA $282 /Sf of GBA $3,754,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $225,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 75,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 188,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 45,000 Total Indirect Costs $943,000
IV. Financing Costs
Interest During Construction
Land 6 $2,474,900 Cost 6.0% Avg Rate $186,000
Construction 7 $5,185,000 Cost 6.0% Avg Rate 233,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 69,000 Total Financing Costs $488,000
V. Total Construction Cost 10 Units $519,000 /Unit $5,185,000 Total Development Cost 10 Units $769,000 /Unit $7,685,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $25,100 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 12 6 22 RB Rent Inclusionary; PF SM ML Page 17 of 44 APPENDIX C - EXHIBIT III - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MODIFIED LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 9 Units @ $4,502 /Unit/Month 507,860
B. Modified Low Income Units 2
One-Bedroom Units 0 Units @ $1,344 /Unit/Month 0
Two-Bedroom Units 1 Units @ $1,495 /Unit/Month 10,760
C. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $521,620
Vacancy & Collection Allowance 5% Gross Income (26,080) II. Effective Gross Income $495,540
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $9,100 /Unit 91,400
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses 10 Units @ $13,790 /Unit ($137,900) IV. Stabilized Net Operating Income $357,640
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.50 per square foot of leasable area. 2 Under Section 50053, the low income rent calculations are based on household income at 80% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 12 6 22 RB Rent Inclusionary; PF SM ML Page 18 of 44 APPENDIX C - EXHIBIT III - TABLE 3

INCLUSIONARY HOUSING IMPACTS

MODIFIED LOW INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT III - TABLE 2 $357,640 Threshold Return on Total Investment 1 4.9%
Total Supportable Investment $7,350,000
II. Total Development Cost See APPENDIX C - EXHIBIT III - TABLE 1 $7,685,000 III. Total Financial Impact ($335,000)
Property Acquisition Cost Reduction 13% of Estimated Current Acquisition Prices Stabilized Return on Total Investment 4.7% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.2% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 12 6 22 RB Rent Inclusionary; PF SM ML Page 19 of 44

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT IV

PRO FORMA ANALYSIS

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Rent Inclusionary; PF SM Mod Page 20 of 44 APPENDIX C - EXHIBIT IV - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $200 /Sf of Land $2,500,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 3 Spaces $5,000 /Space 15,000
Above-Ground Spaces 21 Spaces $25,000 /Space 525,000
Building Costs 13,333 Sf of GBA $180 /Sf of GBA 2,400,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 626,000 Total Direct Costs 13,333 Sf of GBA $282 /Sf of GBA $3,754,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $225,000 Public Permits & Fees 5 10 Units $40,000 /Unit 400,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 75,000 Marketing 10 Units $1,000 /Unit 10,000
Developer Fee 5% Direct Costs 188,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 45,000 Total Indirect Costs $943,000
IV. Financing Costs
Interest During Construction
Land 6 $2,470,100 Cost 6.0% Avg Rate $185,000
Construction 7 $5,184,000 Cost 6.0% Avg Rate 233,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 69,000 Total Financing Costs $487,000
V. Total Construction Cost 10 Units $518,000 /Unit $5,184,000 Total Development Cost 10 Units $768,000 /Unit $7,684,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for Two-Bedroom Units and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $29,900 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 12 6 22 RB Rent Inclusionary; PF SM Mod Page 21 of 44 APPENDIX C - EXHIBIT IV - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 9 Units @ $4,502 /Unit/Month 491,660
B. Moderate Income Units 2
One-Bedroom Units 0 Units @ $1,891 /Unit/Month 0
Two-Bedroom Units 1 Units @ $2,110 /Unit/Month 22,790
C. Laundry & Miscellaneous Income 10 Units @ $25 /Unit/Month 3,000 Total Gross Income $517,450
Vacancy & Collection Allowance 5% Gross Income (25,870) II. Effective Gross Income $491,580
III. Operating Expenses
General Operating Expenses 10 Units @ $4,500 /Unit $45,000 Property Taxes 10 Units @ $9,100 /Unit 90,600
Replacement Reserve Deposits 10 Units @ $150 /Unit 1,500 Total Operating Expenses 10 Units @ $13,710 /Unit ($137,100) IV. Stabilized Net Operating Income $354,480
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.50 per square foot of leasable area. 2 Under Section 50053, the moderate income rent calculations are based on household income at 110% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 12 6 22 RB Rent Inclusionary; PF SM Mod Page 22 of 44 APPENDIX C - EXHIBIT IV - TABLE 3

INCLUSIONARY HOUSING IMPACTS

MODERATE INCOME ALTERNATIVE
SMALL PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT IV - TABLE 2 $354,480 Threshold Return on Total Investment 1 4.9%
Total Supportable Investment $7,285,000
II. Total Development Cost See APPENDIX C - EXHIBIT IV - TABLE 1 $7,684,000 III. Total Financial Impact ($399,000)
Property Acquisition Cost Reduction 16% of Estimated Current Acquisition Prices Stabilized Return on Total Investment 4.6% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 5.2% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 12 6 22 RB Rent Inclusionary; PF SM Mod Page 23 of 44

REDONDO BEACH, CALIFORNIA

APPENDIX C - EXHIBIT V

PRO FORMA ANALYSIS

STATE DENSITY BONUS PROTOTYPE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS INCLUSIONARY HOUSING: FINANCIAL EVALUATION

APARTMENT DEVELOPMENT
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File name: 12 6 22 RB Rent Inclusionary; PF SM DB Page 24 of 44 APPENDIX C - EXHIBIT V - TABLE 1

ESTIMATED DEVELOPMENT COSTS

STATE DENSITY BONUS PROTOTYPE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 12,500 Sf of Land $200 /Sf of Land $2,500,000 II. Direct Costs 2
On-Site Improvements/Landscaping 12,500 Sf of Land $15 /Sf of Land $188,000 Parking 3
At-Grade Spaces 0 Spaces $5,000 /Space 0
Above-Ground Spaces 30 Spaces $25,000 /Space 750,000
Building Costs 20,000 Sf of GBA $200 /Sf of GBA 4,000,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 988,000 Total Direct Costs 20,000 Sf of GBA $296 /Sf of GBA $5,926,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $356,000 Public Permits & Fees 5 15 Units $40,000 /Unit 600,000
Taxes, Insurance, Legal & Accounting 2% Direct Costs 119,000 Marketing 15 Units $1,000 /Unit 15,000
Developer Fee 5% Direct Costs 296,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 69,000 Total Indirect Costs $1,455,000
IV. Financing Costs
Interest During Construction
Land 6 $2,474,050 Cost 6.0% Avg Rate $186,000
Construction 7 $8,023,000 Cost 6.0% Avg Rate 361,000
Loan Origination Fees 60% Loan to Cost 1.5 Points 95,000 Total Financing Costs $642,000
V. Total Construction Cost 15 Units $535,000 /Unit $8,023,000 Total Development Cost 15 Units $702,000 /Unit $10,523,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

For sites within 1/4 mile of transit stops, Section 65915 (p) sets the parking standards at 2.0 spaces for Two-Bedroom Units, and no guest spaces can be required. This analysis assumes that 2.0 spaces per unit are provided.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $25,950 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 12 6 22 RB Rent Inclusionary; PF SM DB Page 25 of 44 APPENDIX C - EXHIBIT V - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

STATE DENSITY BONUS PROTOTYPE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 0 Units @ $0 /Unit/Month $0
Two-Bedroom Units 13 Units @ $4,502 /Unit/Month 702,370 B. Inclusionary Units
Density Bonus Very Low Income Units 2
One-Bedroom Units 0 Units @ $797 /Unit/Month 0
Two-Bedroom Units 2 Units @ $880 /Unit/Month 21,120
Modified Low Income Inclusionary Units 3
One-Bedroom Units 0 Units $1,344 /Unit/Month 0
Two-Bedroom Units 0 Units $1,495 /Unit/Month 0
C. Laundry & Miscellaneous Income 15 Units @ $25 /Unit/Month 4,500 Total Gross Income $727,990
Vacancy & Collection Allowance 5% Gross Income (36,400) II. Effective Gross Income $691,590
III. Operating Expenses
General Operating Expenses 15 Units @ $4,500 /Unit $67,500 Property Taxes 15 Units @ $8,400 /Unit 126,600
Replacement Reserve Deposits 15 Units @ $150 /Unit 2,300 Total Operating Expenses 15 Units @ $13,093 /Unit ($196,400) IV. Stabilized Net Operating Income $495,190
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.50 per square foot of leasable area. 2 3 The balance of the affordable units are set aside for low income households. Under Section 50053, the low income rent calculations are based on household income at 80% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

Under Section 65915 (f) (2), 15% of the Base Units are set aside for very-low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 12 6 22 RB Rent Inclusionary; PF SM DB Page 26 of 44 APPENDIX C - EXHIBIT V - TABLE 3

INCLUSIONARY HOUSING IMPACTS

STATE DENSITY BONUS PROTOTYPE
SMALL PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX C - EXHIBIT V - TABLE 2 $495,190 Threshold Return on Total Investment 1 4.9%
Total Supportable Investment $10,177,000
II. Total Development Cost See APPENDIX C - EXHIBIT V - TABLE 1 $10,523,000 III. Total Financial Impact ($346,000)
Property Acquisition Cost Reduction 14% of Estimated Current Acquisition Prices Stabilized Return on Total Investment 4.7% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 3.1% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 12 6 22 RB Rent Inclusionary; PF SM DB Page 27 of 44

REDONDO BEACH, CALIFORNIA

APPENDIX D

PRO FORMA ANALYSES

LARGE PROJECT PROTOTYPE

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
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File name: 12 6 22 RB Rent Inclusionary; App D Title Page 28 of 44

REDONDO BEACH, CALIFORNIA

APPENDIX D - EXHIBIT I

PRO FORMA ANALYSIS

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
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File name: 12 6 22 RB Rent Inclusionary; PF LG Mkt Page 29 of 44 APPENDIX D - EXHIBIT I - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $200 /Sf of Land $26,136,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 30 Spaces $5,000 /Space 150,000
Above-Ground Spaces 180 Spaces $25,000 /Space 4,500,000 Building Costs 109,125 Sf of GBA $180 /Sf of GBA 19,643,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 5,251,000 Total Direct Costs 109,125 Sf of GBA $289 /Sf of GBA $31,504,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $1,890,000 Public Permits & Fees 5 90 Units $40,000 /Unit 3,600,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 630,000 Marketing 90 Units $1,000 /Unit 90,000
Developer Fee 5% Direct Costs 1,575,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 389,000 Total Indirect Costs $8,174,000
IV. Financing Costs
Interest During Construction
Land 6 $26,136,000 Cost 6.0% Avg Rate $1,960,000
Construction 7 $44,264,000 Cost 6.0% Avg Rate 1,992,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 634,000 Total Financing Costs $4,586,000
V. Total Construction Cost 90 Units $492,000 /Unit $44,264,000 Total Development Cost 90 Units $782,000 /Unit $70,400,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for One-Bedroom Units; 2.0 space for Two-Bedroom Units; and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 Based on a 15 month construction period and a 60% average outstanding loan balance. 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

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File name: 12 6 22 RB Rent Inclusionary; PF LG Mkt Page 30 of 44 APPENDIX D - EXHIBIT I - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 36 Units @ $4,413 /Unit/Month $1,906,000 Two-Bedroom Units 54 Units @ $4,727 /Unit/Month 3,063,000 B. Laundry & Miscellaneous Income 90 Units @ $25 /Unit/Month 27,000 Total Gross Income $4,996,000
Vacancy & Collection Allowance 5% Gross Income (250,000) II. Effective Gross Income $4,746,000
III. Operating Expenses
General Operating Expenses 90 Units @ $4,500 /Unit $405,000 Property Taxes 90 Units @ $9,800 /Unit 881,000
Replacement Reserve Deposits 90 Units @ $150 /Unit 14,000 Total Operating Expenses ($1,300,000)
IV. Stabilized Net Operating Income $3,446,000
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.74 per square foot of leasable area.

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File name: 12 6 22 RB Rent Inclusionary; PF LG Mkt Page 31 of 44 APPENDIX D - EXHIBIT I - TABLE 3

ESTIMATED DEVELOPER RETURN

MARKET RATE ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Stabilized Net Operating Income See APPENDIX D - EXHIBIT I - TABLE 2 $3,446,000 II. Total Development Cost See APPENDIX D - EXHIBIT I - TABLE 1 $70,400,000 III. Stabilized Return on Total Investment 4.89%
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REDONDO BEACH, CALIFORNIA

APPENDIX D - EXHIBIT II

PRO FORMA ANALYSIS

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
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File name: 12 6 22 RB Rent Inclusionary; PF LG VL Page 33 of 44 APPENDIX D - EXHIBIT II - TABLE 1

ESTIMATED DEVELOPMENT COSTS

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $200 /Sf of Land $26,136,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 30 Spaces $5,000 /Space 150,000
Above-Ground Spaces 180 Spaces $25,000 /Space 4,500,000 Building Costs 109,125 Sf of GBA $180 /Sf of GBA 19,643,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 5,251,000 Total Direct Costs 109,125 Sf of GBA $289 /Sf of GBA $31,504,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $1,890,000 Public Permits & Fees 5 90 Units $40,000 /Unit 3,600,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 630,000 Marketing 90 Units $1,000 /Unit 90,000
Developer Fee 5% Direct Costs 1,575,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 389,000 Total Indirect Costs $8,174,000
IV. Financing Costs
Interest During Construction
Land 6 $25,930,400 Cost 6.0% Avg Rate $1,945,000
Construction 7 $44,247,000 Cost 6.0% Avg Rate 1,991,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 633,000 Total Financing Costs $4,569,000
V. Total Construction Cost 90 Units $492,000 /Unit $44,247,000 Total Development Cost 90 Units $782,000 /Unit $70,383,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for One-Bedroom Units; 2.0 space for Two-Bedroom Units; and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on a 15 month construction period and a 60% average outstanding loan balance.

Based on a 15 month construction period and a 100% average outstanding loan balance. Includes a $205,600 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 12 6 22 RB Rent Inclusionary; PF LG VL Page 34 of 44 APPENDIX D - EXHIBIT II - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 34 Units @ $4,413 /Unit/Month $1,800,000 Two-Bedroom Units 52 Units @ $4,727 /Unit/Month 2,950,000 B. Very Low Income Units 2
One-Bedroom Units 2 Units @ $797 /Unit/Month 19,000
Two-Bedroom Units 2 Units @ $880 /Unit/Month 21,000
C. Laundry & Miscellaneous Income 90 Units @ $25 /Unit/Month 27,000 Total Gross Income $4,817,000
Vacancy & Collection Allowance 5% Gross Income (241,000) II. Effective Gross Income $4,576,000
III. Operating Expenses
General Operating Expenses 90 Units @ $4,500 /Unit $405,000 Property Taxes 90 Units @ $9,400 /Unit 846,000
Replacement Reserve Deposits 90 Units @ $150 /Unit 14,000 Total Operating Expenses 90 Units @ $14,056 /Unit ($1,265,000) IV. Stabilized Net Operating Income $3,311,000
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.74 per square foot of leasable area. 2 Under Section 50053, the very low income rent calculations are based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 12 6 22 RB Rent Inclusionary; PF LG VL Page 35 of 44 APPENDIX D - EXHIBIT II - TABLE 3

INCLUSIONARY HOUSING IMPACTS

VERY LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX D - EXHIBIT II - TABLE 2 $3,311,000 Threshold Return on Total Investment 1 4.9%
Total Supportable Investment $67,642,000
II. Total Development Cost See APPENDIX D - EXHIBIT II - TABLE 1 $70,383,000 III. Total Financial Impact ($2,741,000)
Property Acquisition Cost Reduction 10% of Estimated Current Acquisition Prices Stabilized Return on Total Investment 4.7% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 3.7% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 12 6 22 RB Rent Inclusionary; PF LG VL Page 36 of 44

REDONDO BEACH, CALIFORNIA

APPENDIX D - EXHIBIT III

PRO FORMA ANALYSIS

MODIFIED LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION
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File name: 12 6 22 RB Rent Inclusionary; PF LG ML Page 37 of 44 APPENDIX D - EXHIBIT III - TABLE 1

ESTIMATED DEVELOPMENT COSTS

MODIFIED LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $200 /Sf of Land $26,136,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 30 Spaces $5,000 /Space 150,000
Above-Ground Spaces 180 Spaces $25,000 /Space 4,500,000 Building Costs 109,125 Sf of GBA $180 /Sf of GBA 19,643,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 5,251,000 Total Direct Costs 109,125 Sf of GBA $289 /Sf of GBA $31,504,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $1,890,000 Public Permits & Fees 5 90 Units $40,000 /Unit 3,600,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 630,000 Marketing 90 Units $1,000 /Unit 90,000
Developer Fee 5% Direct Costs 1,575,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 389,000 Total Indirect Costs $8,174,000
IV. Financing Costs
Interest During Construction
Land 6 $25,875,600 Cost 6.0% Avg Rate $1,941,000
Construction 7 $44,243,000 Cost 6.0% Avg Rate 1,991,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 633,000 Total Financing Costs $4,565,000
V. Total Construction Cost 90 Units $492,000 /Unit $44,243,000 Total Development Cost 90 Units $782,000 /Unit $70,379,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 The base requirement is 2.0 spaces for One-Bedroom Units; 2.0 space for Two-Bedroom Units; and 0.33 spaces per unit for guest parking. 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on an 15 month construction period and a 60% average outstanding loan balance.

Based on an 15 month construction period and a 100% average outstanding loan balance. Includes a $260,400 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 12 6 22 RB Rent Inclusionary; PF LG ML Page 38 of 44 APPENDIX D - EXHIBIT III - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

MODIFIED LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 33 Units @ $4,413 /Unit/Month $1,747,000 Two-Bedroom Units 51 Units @ $4,727 /Unit/Month 2,893,000 B. Modified Low Income Units 2
One-Bedroom Units 3 Units @ $1,344 /Unit/Month 48,000
Two-Bedroom Units 3 Units @ $1,495 /Unit/Month 54,000
C. Laundry & Miscellaneous Income 90 Units @ $25 /Unit/Month 27,000 Total Gross Income $4,769,000
Vacancy & Collection Allowance 5% Gross Income (238,000) II. Effective Gross Income $4,531,000
III. Operating Expenses
General Operating Expenses 90 Units @ $4,500 /Unit $405,000 Property Taxes 90 Units @ $9,300 /Unit 837,000
Replacement Reserve Deposits 90 Units @ $150 /Unit 14,000 Total Operating Expenses 90 Units @ $13,956 /Unit ($1,256,000) IV. Stabilized Net Operating Income $3,275,000
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.74 per square foot of leasable area. 2 Under Section 50053, the low income rent calculations are based on household income at 80% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 12 6 22 RB Rent Inclusionary; PF LG ML Page 39 of 44 APPENDIX D - EXHIBIT III - TABLE 3

INCLUSIONARY HOUSING IMPACTS

MODIFIED LOW INCOME ALTERNATIVE
LARGE PROJECT PROTOTYPE: ZONING COMPLIANT

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX D - EXHIBIT III - TABLE 2 $3,275,000 Threshold Return on Total Investment 1 4.9%
Total Supportable Investment $66,907,000
II. Total Development Cost See APPENDIX D - EXHIBIT III - TABLE 1 $70,379,000 III. Total Financial Impact ($3,472,000)
Property Acquisition Cost Reduction 13% of Estimated Current Acquisition Prices Stabilized Return on Total Investment 4.7% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 4.8% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 12 6 22 RB Rent Inclusionary; PF LG ML Page 40 of 44

REDONDO BEACH, CALIFORNIA
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

APPENDIX D - EXHIBIT V

PRO FORMA ANALYSIS

STATE DENSITY BONUS PROTOTYPE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
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File name: 12 6 22 RB Rent Inclusionary; PF LG DB Page 41 of 44 APPENDIX D - EXHIBIT V - TABLE 1

ESTIMATED DEVELOPMENT COSTS

STATE DENSITY BONUS PROTOTYPE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Property Acquisition Costs 1 130,680 Sf of Land $200 /Sf of Land $26,136,000 II. Direct Costs 2
On-Site Improvements/Landscaping 130,680 Sf of Land $15 /Sf of Land $1,960,000 Parking 3
At-Grade Spaces 0 Spaces $5,000 /Space 0
Above-Ground Spaces 216 Spaces $25,000 /Space 5,400,000 Building Costs 163,688 Sf of GBA $200 /Sf of GBA 32,738,000 Contractor/DC Contingency Allow 4 20% Other Direct Costs 8,020,000 Total Direct Costs 163,688 Sf of GBA $294 /Sf of GBA $48,118,000 III. Indirect Costs
Architecture, Engineering & Consulting 6% Direct Costs $2,887,000 Public Permits & Fees 5 135 Units $40,000 /Unit 5,400,000 Taxes, Insurance, Legal & Accounting 2% Direct Costs 962,000 Marketing 135 Units $1,000 /Unit 135,000
Developer Fee 5% Direct Costs 2,406,000
Soft Cost Contingency Allowance 5% Other Indirect Costs 590,000 Total Indirect Costs $12,380,000
IV. Financing Costs
Interest During Construction
Land 6 $26,136,000 Cost 6.0% Avg Rate $1,960,000
Construction 7 $66,272,000 Cost 6.0% Avg Rate 2,982,000 Loan Origination Fees 60% Loan to Cost 1.5 Points 832,000 Total Financing Costs $5,774,000
V. Total Construction Cost 135 Units $491,000 /Unit $66,272,000 Total Development Cost 135 Units $685,000 /Unit $92,408,000 1 Estimated in part based on a sales survey of properties in Redondo Beach with residential and mixed-use zoning. 2 Based on the estimated costs for similar uses.
3 4 Includes contractors' fees, general requirements, builder's risk insurance and a direct cost contingency allowance. 5 Based on impact fee information provided by the City staff plus an allowance for building permit fees. 6 7 Based on an 15 month construction period and a 60% average outstanding loan balance.

For sites within 1/4 mile of transit stops, Section 65915 (p) sets the parking standards at 1.0 space for One-Bedroom Units; 2.0 spaces for TwoBedroom Units; and no guest spaces can be required. This analysis assumes that 1.0 space per one-bedroom unit and 2.0 spaces per two-bedroom unit are provided.

Based on an 15 month construction period and a 100% average outstanding loan balance. Includes a $0 offset to reflect the carrying cost savings associated with the estimated property acquisition cost reduction.

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File name: 12 6 22 RB Rent Inclusionary; PF LG DB Page 42 of 44 APPENDIX D - EXHIBIT V - TABLE 2

ESTIMATED STABILIZED NET OPERATING INCOME

STATE DENSITY BONUS PROTOTYPE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Gross Income
A. Market Rate Units 1
One-Bedroom Units 46 Units @ $4,413 /Unit/Month $2,436,000 Two-Bedroom Units 70 Units @ $4,727 /Unit/Month 3,971,000 B. Inclusionary Units
Density Bonus Very Low Income Units 2
One-Bedroom Units 6 Units @ $797 /Unit/Month 57,000
Two-Bedroom Units 8 Units @ $880 /Unit/Month 84,000
Modified Low Income Inclusionary Units 3
One-Bedroom Units 2 Units $1,344 /Unit/Month 32,000
Two-Bedroom Units 3 Units $1,495 /Unit/Month 54,000
C. Laundry & Miscellaneous Income 135 Units @ $25 /Unit/Month 41,000 Total Gross Income $6,675,000
Vacancy & Collection Allowance 5% Gross Income (334,000) II. Effective Gross Income $6,341,000
III. Operating Expenses
General Operating Expenses 135 Units @ $4,500 /Unit $607,500 Property Taxes 135 Units @ $8,600 /Unit 1,163,000
Replacement Reserve Deposits 135 Units @ $150 /Unit 20,000 Total Operating Expenses 135 Units @ $13,263 /Unit ($1,790,500) IV. Stabilized Net Operating Income $4,550,500
1 Based in part on the rent survey presented in APPENDIX A. The weighted average monthly rent equates to $4.74 per square foot of leasable area. 2 3
Under Section 65915 (f) (2), 15% of the Base Units are set aside for very-low income households. Section 65915 (c) (1) (B) (i) calculates very low income rents based on household income at 50% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

The balance of the affordable units are set aside for low income households. Under Section 50053, the low income rent calculations are based on household income at 80% of AMI, with 30% of income allotted to housing related expenses. See APPENDIX B.

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File name: 12 6 22 RB Rent Inclusionary; PF LG DB Page 43 of 44 APPENDIX D - EXHIBIT V - TABLE 3

INCLUSIONARY HOUSING IMPACTS

STATE DENSITY BONUS PROTOTYPE
LARGE PROJECT PROTOTYPE: 50% SECTION 65915 DENSITY BONUS

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Supportable Investment
Stabilized Net Operating Income See APPENDIX D - EXHIBIT V - TABLE 2 $4,550,500 Threshold Return on Total Investment 1 4.9%
Total Supportable Investment $92,964,000
II. Total Development Cost See APPENDIX D - EXHIBIT V - TABLE 1 $92,408,000 III. Total Financial Impact $556,000
Property Acquisition Cost Reduction 0% of Estimated Current Acquisition Prices Stabilized Return on Total Investment 4.9% Based on Estimated Current Property Acquisition Costs % Rent Increase to Offset Impact 0.0% Market Rate Units 1 Based on the Developer Return estimated to be generated by the ZONING COMPLIANT: MARKET RATE ALTERNATIVE.

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File name: 12 6 22 RB Rent Inclusionary; PF LG DB Page 44 of 44 ATTACHMENT 5

IN-LIEU FEE ANALYSES
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Rent Inclusionary; ATT 5 TITLE

APPENDIX A

IN-LIEU FEE ANALYSIS

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File Name: 12 6 22 RB Own Inclusionary; App A ILF

APPENDIX A

IN-LIEU FEE ANALYSIS

AFFORDABILITY GAP APPROACH - MODERATE INCOME

OWNERSHIP HOUSING DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
I. Sales Price Difference
A. One-Bedroom Units
Market Rate Sales Price 1 $880,000
Affordable Sales Price 2 268,200
Difference $611,800
B. Two-Bedroom Units
Market Rate Sales Price 1 $1,123,000
Affordable Sales Price 2 301,700
Difference $821,300
C. Three-Bedroom Units
Market Rate Sales Price 1 $1,738,000
Affordable Sales Price 2 333,300
Difference $1,404,700
D. Four-Bedroom Units
Market Rate Sales Price 1 $1,840,000
Affordable Sales Price 2 353,900
Difference $1,486,100
II. Distribution of Total Units 3
One-Bedroom Units 5%
Two-Bedroom Units 10%
Three-Bedroom Units 20%
Four-Bedroom Units 65%
III. Assumptions
Total Units 35
Saleable Area 76,850
Weighted Average Unit Size 2,196
Inclusionary Housing Percentage 10%
Inclusionary Units 4
Affordability Gap Per Inclusionary Unit 4 $1,360,000
IV. In-Lieu Fee
Total In-Lieu Fee $5,440,000
Per Total Unit in the Project $155,430
Per Square Foot of Saleable Area $70.80
1 The market rate sales prices are drawn from the pro forma analyses. See APPENDIX C - EXHIBIT I and APPENDIX D - EXHIBIT I. 2 3 Based on the unit mix distribution applied in the pro forma analysis. 4 Based on the weighted average difference between the market rate prices and the Affordable Sales Prices.

See APPENDIX B - EXHIBIT I.

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File Name: 12 6 22 RB Own Inclusionary; ILF

APPENDIX B

IN-LIEU FEE ANALYSES

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Prepared by: Keyser Marston Associates, Inc.

File name: 12 6 22 RB Rent Inclusionary; App B_ILF

APPENDIX B

IN-LIEU FEE ANALYSES

AFFORDABILITY GAP APPROACH

LARGE PROJECT PROTOTYPE

APARTMENT DEVELOPMENT
INCLUSIONARY HOUSING: FINANCIAL EVALUATION

REDONDO BEACH, CALIFORNIA
Modified Low Income
I. Rent Difference
A. One-Bedroom Units
Market Rate Units 1 $4,413
Inclusionary Units 2 1,344
Difference $3,069
B. Two-Bedroom Units
Market Rate Units 1 $4,727
Inclusionary Units 2 1,495
Difference $3,232
II. Distribution of Total Units 3
One-Bedroom Units 40%
Two-Bedroom Units 60%
III. Annual Affordability Gap Per Inclusionary Unit $38,003 Less: Property Tax Difference 4 (9,710)
Annual Affordability Gap Per Inclusionary Unit $28,293
IV. Assumptions
Total Units 90
Leasable Area 87,300
Weighted Avg Unit Size (Sf) 970
Inclusionary Housing Percentage 7.0%
Inclusionary Units 6
Affordability Gap Per Inclusionary Unit 5 $578,000
V. In-Lieu Fee
Total In-Lieu Fee $3,468,000
Per Total Unit in the Project $38,530
Per Square Foot of Leasable Area $39.73
1 The market rents are drawn from the pro forma analyses. See APPENDIX D. 2 See APPENDIX B.
3 Based on the unit mix distribution applied in the pro forma analysis. 4 Based on the rent differential capitalized at a 4.5% rate to establish the value, and a 1.15% property tax rate. 5 Based on the Annual Affordability Gap Per Inclusionary Unit capitalized at the Threshold Return on Total Investment.

Prepared by: Keyser Marston Associates
File name: 12 6 22 RB Rent Inclusionary; LG ILF