Inclusionary Housing Program Discussion
Redondo Beach Planning Commission
PRESENTED BY: KEYSER MARSTON ASSOCIATES, INC.
MARCH 16, 2023
What is
Inclusionary
Housing?
Inclusionary housing programs impose affordable
housing requirements on new development:
• The primary focus is on the production of affordable units within market rate projects.
• Options to production requirements must be provided.
The following standards need to be established:
• The required percentage of affordable units.
• The threshold project size that triggers the obligation. • The depth of the affordability requirements.
The standards are typically varied between
ownership and rental projects.
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Inclusionary
Housing
Program
Considerations
The legal standards are:
• The requirement cannot be confiscatory;
• The requirement cannot deprive a property owner or
developer of a fair return on investment; and
• The requirement cannot create a constraint to housing. The requirement should balance the interest of
the property owners and developers against the
public benefit created by the production of
affordable units.
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Parameters to
be Established
Target income and affordability standards.
The minimum project size that will trigger the
requirements.
Alternative options to the requirement for onsite production of affordable housing units:
• In-lieu fee option
• Off-site production option or creation of a separate
parcel
• Rental units to fulfill ownership housing requirements • Land dedication
• Acquisition and substantial rehabilitation of existing rental units.
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City Council Policy Direction
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Threshold Project Size
Inclusionary requirements are imposed on all developments with 2+ units. • The KMA financial evaluation indicated that a full affordable unit could not be supported for projects with fewer than 10 units.
• A sliding scale in-lieu fee payment schedule will be provided for project with 2-9 units. All projects with 10+ units:
• Inclusionary units are required (no in-lieu fee payment is allowed with the exception of extreme hardship).
• Fractional affordable unit requirement:
• The original City Council direction was for a fractional obligation to be rounded down to the nearest whole number.
• At their November 8, 2022 meeting, the City Council requested that an in-lieu fee schedule be created for fractional unit obligations generated by projects with 10+ units.
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Standards for Market Rate “For Sale" Projects
Inclusionary Obligation Fulfilled with For Sale Units on Site • Up to 19 Units 9% Moderate Income Required
• 20+ Units 15% Moderate Income Required
• One cumulative 55-year term covenant.
• When covenant term expires, City recaptures the Affordability Gap associated with the first market rate sale plus a share of the equity appreciation. • Owner must occupy unit as principal place of residence. • Cannot lease any portion of unit except caregiver or extreme economic hardship. Inclusionary Obligation Fulfilled with Rental Units
• On Site 15% Low Income Required Within project or on separate parcel on site • Off Site 15% Low Income Required Must be within 1/4 mile of site • Developer may choose to provide very low income units rather than low income units. • Covenant as long as residential use, no less than 75-year term.
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Standards for Market Rate Apartment Projects
Inclusionary Obligation Fulfilled with On Site Rental Units • Up to 19 Units 10% Moderate Income Required
• 20+ Units 15% Moderate Income Required
• Covenant as long as residential use, no less than 75-year term. Inclusionary Requirement Fulfilled with Off Site Rental Units • All Project Sizes 15% Low Income Required
• Must be within 1/4 mile of Market Rate Project
• Developer may choose to provide very low income units rather than low income units. • Covenant as long as residential use, no less than 75-year term.
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Standards for All Residential Projects
Inclusionary units made available prior to or concurrent with the market rate units. Phased project, inclusionary units provided proportionally within each phase. Comparable in construction quality and exterior design. Interior Finishes:
• For sale homes must include comparable interior finishes to the market rate units. • Rental Units must have interior finishes that meet the quality standards established by California Tax Credit Allocation Committee.
Same rights to amenities, including parking.
Reasonably dispersed throughout development, not clustered. Bedroom mix proportional to market rate. For rental, no more than 15% studio and at least 40% 2 or more bedrooms.
Extreme economic hardship request must be heard by City Council.
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City Council Direction to Planning Commission
•Consider the requirements for units to be affordable to households at 70% of median, 80% of median, or 120% of median (currently is moderate income). ◦ The financial evaluation was updated to show each of these potential levels of affordability. ◦ With the changes in market conditions between initial evaluation and updated, the “modified low income” of today mimics the “low income” in 2020.
•For projects 10 units or greater, consider an in-lieu payment for any fractional amount rather than just rounding for any fractional amount (the latter is what is in the current draft of the ordinance).
◦ City Council is interested in revising draft ordinance to include fractional amount to capture contribution toward affordable housing.
•Consider “densification” as a result of the adoption of the ordinance.
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Updated Standards:
Market Rate Apartment Projects
The primary factors that influenced the results are:
• Increases in market rate rents; and
• Increases in construction costs.
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%
Obligation
AMI
(3 person hhld)
November 2021
Moderate Income 9% $79,200
Low Income 7% $43,200
November 2022
Moderate Income 8% $90,200
Modified Low Income 7% $65,600
In Lieu Fees
•Discounted for Projects <10 Units
•Fractional Proposed for Projects 10+ Units
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Recommended In-Lieu Fee Payment Schedules:
Per Square Foot of Total Leasable or Saleable Area in the Project Recommended In-Lieu Fee Payment Schedules
Per Square Foot of Total Leasable or Saleable Area in the Project Number of Units
Apartment
Development
Ownership Housing
Development
2 $4.41 $7.87
3 $8.83 $15.73
4 $13.24 $23.60
5 $17.66 $31.47
6 $22.07 $39.33
7 $26.48 $47.20
8 $30.90 $55.07
9 $35.31 $62.93
10+ * $39.73 $70.80
*Only allowed in demonstrated cases of extreme financial hardship March 16, 2023 KEYSER MARSTON ASSOCIATES, INC. 13
Recommended Fractional In-Lieu Fee Payment Schedule:
Per Square Foot of the Leasable or Saleable Area of One Unit in the Project March 16, 2023 KEYSER MARSTON ASSOCIATES, INC. 14
Fractional In-Lieu Fee Payment Calculations
Per Square Foot of the Leasable Area of One Unit in the Apartment Development
Net Affordability Gap Per Inclusionary Unit $578,000
Average Unit Size (Square Feet of Leasable Area) 970
In-Lieu Fee Per Square Foot of One Unit $595.90
Fractional In-Lieu Fee:
Per Square Foot of
One Unit
Total Fractional InLieu Fee:
Prototype Apartment
Development
.1 $59.60 $57,812
.2 $119.20 $115,624
.3 $178.80 $173,436
.4 $238.40 $231,248
.5 $298.00 $289,060
.6 $357.50 $346,775
.7 $417.10 $404,587
.8 $476.70 $462,399
.9 $536.30 $520,211
Fractional In-Lieu Fee Payment Calculations
Per Square Foot of the Saleable Area of One Unit in the Ownership Housing Development
Net Affordability Gap Per Inclusionary Unit $1,360,000
Average Unit Size (Square Feet of Saleable Area) 2,196
In-Lieu Fee Per Square Foot of One Unit $619.40
Fractional In-Lieu Fee:
Per Square Foot of
One Unit
Total Fractional InLieu Fee:
Prototype Ownership
Housing Development
.1 $61.90 $135,915
.2 $123.90 $272,049
.3 $185.80 $407,964
.4 $247.80 $544,098
.5 $309.70 $680,013
.6 $371.60 $815,927
.7 $433.60 $952,062
.8 $495.50 $1,087,976
.9 $557.50 $1,224,111
Section 65915 Density Bonus
•The following very low income inclusionary requirements can be supported when the project can efficiently use the Section 65915 density bonus:
•AB 1505 and subsequent HCD guidance recommend limiting the inclusionary housing requirement to 15% of the units to household earning no more than 80% of AMI (Modified Low Income).
•The affordability requirement for density bonus is measured against the number of units allowed by the site’s base zoning standards.
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For sale project that fulfills the affordable housing requirement with rental units 19% Apartment project that includes the maximum allowable density bonus 21% Recommendations
1. Open the continued public hearing, take testimony from staff and other interested parties, and deliberate;
a) Consider potential levels of affordability
b) Consider in-lieu payment for any fractional unit requirement on projects 10+ units in size c) Discuss density as a result of adoption of ordinances
2. Close the public hearing; and
3. Adopt a resolution by title only subject to the findings contained therein:
A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF REDONDO BEACH,
CALIFORNIA, RECOMMENDING THAT THE CITY COUNCIL ADOPT ORDINANCES AMENDING TITLE 10, CHAPTER 2 ZONING AND LAND USE AND TITLE 10, CHAPTER 5
COASTAL LAND USE PLAN IMPLEMENTING ORDINANCE PERTAINING TO INCLUSIONARY
HOUSING REGULATIONS AND RECOMMENDING THAT THE CITY COUNCIL ADOPT
CATEGORICAL EXEMPTIONS FROM THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) FOR THE AMENDMENTS
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