1 Economic & Planning Systems, Inc.
The Economics of Land Use
949 South Hope Street, Suite 103 Los Angeles, CA 90015 213.489.3838 www.epsys.com
Economic & Planning Systems, Inc.
The Economics of Land Use
CITY OF RIVERSIDE
INCLUSIONARY HOUSING
PROGRAM STUDY
Housing and Homelessness
Committee Meeting Update
May 23, 2022
Economic & Planning Systems EPS PPT Presentation | 1
AGENDA
Study Process To-Date
Overview of Nexus Study
Inclusionary Housing Ordinance Elements Discussion
Next Steps
0 1
2 Economic & Planning Systems EPS PPT Presentation | 2
STUDY PROCESS TO-DATE
•EPS engaged by City
May 2021
•EPS preliminary technical analysis
June-August 2021
•Presentation of preliminary findings to HHC
September 2021
•Meetings with targeted stakeholder groups
November 2021
•Community town hall presentation
January 2022
•Presentation of preliminary recommendations to HHC
February 2022
•EPS and City staff work on nexus study and ordinance framework March-April 2022
NEXUS STUDY
2 3
3 Economic & Planning Systems EPS PPT Presentation | 4
OVERVIEW OF NEXUS STUDY
EPS’s scope of work with the City includes the completion of a nexus- based affordable housing fee analysis
Nexus-based analyses for affordable housing fees originated after the 2009 Palmer decision, which limited cities’ ability to mandate inclusionary requirements on rental housing
In 2017, State passed AB 1505, which clarified that cities may adopt inclusionary requirements for both ownership and rental residential developments
Some cities still complete nexus studies to provide additional context in determining inclusionary requirements and related fees Most legal opinions suggest that nexus findings are not required for adopting an inclusionary housing program
Economic & Planning Systems EPS PPT Presentation | 5
NEXUS-BASED HOUSING FEE METHODOLOGY
Step #2
Affordable Housing
Demand
(Generated by Market Rate
Housing)
Step #3
Compute Impact
Fee per Market
Rate Unit
Household
Expenditures by
Category
Total Workers to
Provide Goods
and Services by
Expenditure
Category
Total
Demand for
Affordable
Units for
Workers
Market
Rate Home
Price
Required
Household
Income Level
Workers'
Income
Levels and
Household
Formation
Step #1
Affordability Gap Analysis
(Subsidy Required to Construct
Affordable Units)
Affordable
Unit Value by
Income Level
Development Costs Affordability
Gap
Subsidy
Required
No Subsidy
Required
If negative
If positive
minus equals
Supportable Nexus-Based
Housing Fee
(per market rate unit)
Affordability
Gap
(Subsidy Required)
multiplied
by
Demand for Affordable
Units for Workers
(per market rate unit)
equals
4 5
4 Economic & Planning Systems EPS PPT Presentation | 6
Item
Extremely Low Income
(30% AMI)
Very Low Income
(50% AMI)
Low Income
(70% AMI)
Moderate Income
(110% AMI)
Development Program Assumptions
Density/ A c r e 3 23 23 23 2
Gross Unit Size 978 978 978 978
Net Unit Size 850 850 850 850
Number of Bedrooms 2 2 2 2
Number of Persons per 2-bedroom Unit 3 3 3 3
Parking Spaces/Unit 1.00 1.00 1.00 1.00
Cost Assumptions
Land/Acre $435,600 $435,600 $435,600 $435,600
Land/Unit $13,613 $13,613 $13,613 $13,613
Direct Costs
Direct Construction Costs/Net SF $205 $205 $205 $205
Direct Construction Costs/Unit $200,000 $200,000 $200,000 $200,000 Parking Construction Costs/Unit $5,000 $5,000 $5,000 $5,000 Subtotal, Direct Costs/Unit $205,000 $205,000 $205,000 $205,000 Indirect Costs as a % of Direct Costs 35% 35% 35% 35%
Indirect Costs/Unit $71,750 $71,750 $71,750 $71,750
Developer Fee (% of all costs) 14% 14% 14% 14%
Fee Amount $40,651 $40,651 $40,651 $40,651
Total Cost/Unit (rounded) $331,000 $331,000 $331,000 $331,000 Maximum Supported Home Price
Household Income $21,960 $35,550 $49,802 $76,725
Income Available for Housing Costs/Year $6,588 $10,665 $14,941 $23,018 (less) Operating Expenses per Unit/Year ($4,500) ($4,500) ($4,500) ($8,568) Net Operating Income $2,088 $6,165 $10,441 $14,450
Capitalization Rate 5.0% 5.0% 5.0% 5.0%
Total Supportable Unit Value $41,760 $123,300 $208,812 $288,990 Affordability Gap $289,240 $207,700 $122,188 $42,010
STEP 1: CALCULATE AFFORDABILITY GAP
3-Story | Mid-Density | Multifamily Rental | Surface Parking Economic & Planning Systems EPS PPT Presentation | 7
Rental
Avg. Monthly
Rent [1]
Monthly Utility
Costs [2]
Monthly Rent
and Utilities
Annual Rent
and Utilities
Min. Required
Income [3]
Apartment Unit $2,571 $245 $2,816 $33,792 $112,640
For-Sale Unit Price [4] Mortgage [5]
Mortgage
Payment [5]
Property
Taxes [6]
HOA
Dues [7]
Home
Insurance [8] Utilities [2]
Min. Required
Income [3]
Townhome $400,000 $360,000 $19,574 $4,480 $3,000 $1,500 $3,708 $92,176 Single Family $625,000 $562,500 $30,584 $7,000 $2,100 $1,500 $4,116 $129,428 Residential Type Household Income Estimation
Annual Costs
STEP 2: CALCULATE MINIMUM REQUIRED INCOME
[1] Average monthly rent based on the rent of the apartment prototype in the feasibility study. [2] Based on the Housing Authority of the County of Riverside Utility Allowance effective 7/1/2021 (assumes natural gas). [3] Assumes that housing costs is 30% of required income for rental units and 35% for for-sale units. [4] Based on for-sale prices of prototypes in the feasibility study. [7] HOA dues are based on the feasibility study at a monthly rate of $250 per townhome and $175 per single family home. [5] Based on mortgage terms of a 10% downpayment and 3.5% interest for 30 years per the assumptions of the feasibilty study. [6] Based on a property tax rate of 1.1%
[8] Insurance fees are based on the feasibility study at a monthly rate of $125 per unit. 6 7
5 Economic & Planning Systems EPS PPT Presentation | 8
Retail Category
% of HH Income
Spent per
Category
% of Category
Expenditure per
Business Type Expenditures
Expenditures per
1,000 HHs
Gross
Receipts to
Wages
Total Wages
per 1,000 HH
2022 Avg.
Wages
# of New
Workers
% Forming
HH
Workers/
HH
Total Worker
HHs
Avg. Worker
HH Income Income Category
Calculation a b c d = c * 1,000 e f = d / e g h = f / g i j k= h * i / j l = g * j Food at Home 5.7% 100% $6,475
Food & Beverage Stores 100% $6,475 $6,475,361 10.11 $640,760 $33,572 19.1 87.5% 2.00 8.3 $67,213 Moderate Income Food Away From Home 5.1% 100% $5,714
Food Services and Drinking Places 100% $5,714 $5,713,554 3.40 $1,682,102 $20,251 83.1 87.5% 2.00 36.3 $40,543 LI Households Alcoholic Beverages 0.7% 100% $833
Food & Beverage Stores 50% $417 $416,547 10.11 $41,219 $33,572 1.2 87.5% 2.00 0.5 $67,213 Moderate Income Food Services and Drinking Places 50% $417 $416,547 3.40 $122,634 $20,251 6.1 87.5% 2.00 2.6 $40,543 LI Households Housing Maintenance, Repairs, Insurance, Othe 1.8% 100% $2,020 Personal and Household Goods Repair and Mainte 45% $909 $909,221 3.50 $259,498 $25,120 10.3 98.1% 2.00 5.1 $50,291 LI Households Building Material and Garden Equipment and Supp 45% $909 $909,221 9.06 $100,348 $34,319 2.9 87.5% 2.00 1.3 $68,707 Moderate Income Real Estate and Rental and Leasing 10% $202 $202,049 5.62 $35,969 $52,689 0.7 98.1% 2.00 0.3 $105,485 Above Mod Fuel oil and Other fuels 4.5% 100% $5,111
Nonstore Retailers 100% $5,111 $5,111,343 13.81 $370,007 $50,225 7.4 87.5% 2.00 3.2 $100,551 Above Mod Water and Other Public Services 1.0% 100% $1,094
Waste Management and Remediation Services 100% $1,094 $1,093,768 3.85 $284,338 $71,299 4.0 98.1% 2.00 2.0 $142,744 Above Mod Household Operations Personal Services 0.6% 100% $679
Nursing and Residential Care Facilities 40% $272 $271,527 2.40 $113,255 $34,764 3.3 98.1% 2.00 1.6 $69,599 Moderate Income Social Assistance 60% $407 $407,290 2.81 $144,763 $33,376 4.3 98.1% 2.00 2.1 $66,819 Moderate Income Household Operations Other Household Expens 1.3% 100% $1,490 Services to Buildings and Dwellings 100% $1,490 $1,489,567 2.97 $500,803 $31,415 15.9 98.1% 2.00 7.8 $62,894 Moderate Income Housekeeping Supplies 0.9% 100% $1,011
Building Materials and Garden Equipment and Sup 10% $101 $101,078 9.06 $11,156 $34,319 0.3 87.5% 2.00 0.1 $68,707 Moderate Income Food & Beverage Stores 35% $354 $353,772 10.11 $35,007 $33,572 1.0 87.5% 2.00 0.5 $67,213 Moderate Income * Illustrative Example Only. Calculation is co
Total per 1,000 Market Rate Households 308.5 140.7
STEP 2: HH EXPENDITURES/EMPLOYMENT GENERATION (EX. APARTMENT) Minimum Required HH Income for a Market Rate Apartment: $112,640 Economic & Planning Systems EPS PPT Presentation | 9
STEP 2: WORKER INCOME LEVELS/ HH FORMATION (EX. APARTMENT) Industry
Total
Workers
Total Worker
Households
ELI
Households
VLI
Households LI Households
Moderate Income
Households
Above Moderate
Income Households
Retail
Unspecified Retail 5.1 2.2 0.0 0.0 2.2 0.0 0.0
Food & Beverage Stores 21.4 9.3 0.0 0.0 0.0 9.3 0.0
Food Services and Drinking Places 89.1 38.9 0.0 0.0 38.9 0.0 0.0 Health and Personal Care Stores 2.4 1.0 0.0 0.0 0.0 1.0 0.0 General Merchandise 5.6 2.4 0.0 0.0 0.0 2.4 0.0
Furniture and Home Furnishings Stores 4.3 1.9 0.0 0.0 0.0 1.9 0.0 Building Material and Garden Equipment and Supplies Dealer 3.2 1.4 0.0 0.0 0.0 1.4 0.0 Electronics and Appliance Stores 7.3 3.2 0.0 0.0 0.0 3.2 0.0 Clothing and Clothing Accessories Stores 5.7 2.5 0.0 0.0 2.5 0.0 0.0 Motor Vehicle and Parts Dealers 9.1 4.0 0.0 0.0 0.0 0.0 4.0 Gasoline Stations 4.4 1.9 0.0 0.0 1.9 0.0 0.0
Sporting Goods, Hobby, and Musical Instrument Stores 11.0 4.8 0.0 0.0 4.8 0.0 0.0 Miscellaneous Store Retailers 7.5 3.3 0.0 0.0 3.3 0.0 0.0 Nonstore Retailers 7.4 3.2 0.0 0.0 0.0 0.0 3.2
Arts, Entertainment, & Recreation 10.5 4.6 0.0 0.0 0.0 4.6 0.0 Medical/Health
Ambulatory Health Care Services 3.7 1.8 0.0 0.0 0.0 0.0 1.8 General Medical and Surgical Hospitals 2.2 1.1 0.0 0.0 0.0 0.0 1.1 Nursing and Residential Care Facilities 9.0 4.4 0.0 0.0 0.0 4.4 0.0 Social Assistance 4.3 2.1 0.0 0.0 0.0 2.1 0.0
Services
Personal and Household Goods Repair and Maintenance 11.8 5.7 0.0 0.0 5.7 0.0 0.0 Services to Buildings and Dwellings 15.9 7.8 0.0 0.0 0.0 7.8 0.0 Waste Management and Remediation Services 4.0 2.0 0.0 0.0 0.0 0.0 2.0 Real Estate and Rental and Leasing 0.7 0.3 0.0 0.0 0.0 0.0 0.3 Personal Care Services 9.1 4.5 0.0 0.0 4.5 0.0 0.0
Dry Cleaning and Laundry Services 1.5 0.7 0.0 0.0 0.7 0.0 0.0 Auto Repair and Maintenance 10.6 5.2 0.0 0.0 0.0 5.2 0.0 Veterinary Services 1.8 0.9 0.0 0.0 0.0 0.0 0.9
Photographic Services 1.2 0.6 0.0 0.0 0.0 0.6 0.0
Educational Services 30.8 15.1 0.0 0.0 15.1 0.0 0.0
Accounting 2.8 1.4 0.0 0.0 0.0 1.4 0.0
Architectural, Engineering, and Related 1.2 0.6 0.0 0.0 0.0 0.0 0.6 Specialized Design Services 1.1 0.5 0.0 0.0 0.0 0.0 0.5 Death Care Services 1.3 0.7 0.0 0.0 0.0 0.7 0.0
Legal Services 1.2
0.6 0.0 0.0 0.0 0.0 0.6
Total Workers and Households 308.5 140.7 0.0 0.0 79.6 46.1 15.0 Total Income-Qualified HH Generated Per 1,000 Market-Rate Units 125.7 0.0 0.0 79.6 46.1 0.0 Total Income-Qualified HH Generated Per 100 Market-Rate Units 12.6 0.0 0.0 8.0 4.6 0.0 8 9
6 Economic & Planning Systems EPS PPT Presentation | 10 Unit Type
Extremely
Low Income
Very Low
Income
Low
Income
Moderate
Income
Rental
Apartment Unit $112,640 31 14.1 12.6 0.0 0.0 8.0 4.6
For-Sale
Townhome $92,176 26 12.0 10.6 0.0 0.0 6.4 4.3
Single Family $129,428 35 16.2 14.4 0.0 0.0 9.1 5.3
Min. Required
HH Income
Total Workers
Generated
Total
Worker HH
Total Income
Qualified HH
Income Qualified Households by Income Category
SUMMARY OF WORKER AND HH GENERATION (PER 100 UNITS)
Economic & Planning Systems EPS PPT Presentation | 11
Item
Per 100 Market-
Rate Units
Per Market-
Rate Unit
Per Square
Feet
Calculation (A) (B) (C = A * B) (D = C / 100) (E = D / 850 ) Affordable Units - Extremely Low Income 0.0 $289,240 $0 Affordable Units - Very Low Income 0.0 $207,700 $0
Affordable Units - Low Income 8.0 $122,188 $972,958
Affordable Units - Moderate Income 4.6
$42,010 $193,646
Total 12.6 $1,166,604 $11,666 $13.72
Affordable Units
Required Per 100
Market-Rate Units
Affordability
Gap per
Affordable Unit
Total Nexus-Based Fee Supported
STEP 3: NEXUS-BASED HOUSING FEE CALCULATION (EX. APARTMENT) 10 11
7 Economic & Planning Systems EPS PPT Presentation | 12 ELI VLI Low Moderate
(<30% of AMI) (<50% of AMI) (< 70% of AMI) (<110% of AMI) Total Rental
Apartment Unit $11,666 $13.72 0.0% 0.0% 8.0% 4.6% 12.6%
For-Sale
Townhome $9,558 $6.37 0.0% 0.0% 6.4% 4.3% 10.6%
Single Family $13,405 $5.36 0.0% 0.0% 9.1% 5.3% 14.4%
Nexus-Based Fees Unit Requirements by Income Level
per Unit Per SFUnit Type
SUMMARY OF NEXUS-BASED FEES
Economic & Planning Systems EPS PPT Presentation | 13
ELI VLI Low Moderate
(<30% of AMI) (<50% of AMI) (<80% of AMI) (<120% of AMI) Total Apartment Unit
Nexus-Based $11,666 $13.72 0.0% 0.0% 8.0% 4.6% 12.6%
Inclusionary In-Lieu* $13,000 $15.29 0.0% 0.0% 10.0% 0.0% 10.0% Townhome
Nexus-Based $9,558 $6.37 0.0% 0.0% 6.4% 4.3% 10.6%
Inclusionary In-Lieu* $17,000 $11.33 0.0% 0.0% 10.0% 0.0% 10.0% Single Family
Nexus-Based $13,405 $5.36 0.0% 0.0% 9.1% 5.3% 14.4%
Inclusionary In-Lieu* $7,000 $2.80 0.0% 0.0% 0.0% 5.0% 5.0% Unit Type
Nexus-Based Fees Unit Requirements by Income Level
per Unit Per SF
NEXUS-BASED RESULTS VS POTENTIAL INCLUSIONARY IN-LIEU
12 13
8 Economic & Planning Systems EPS PPT Presentation | 14 DISCUSSION OF INCLUSIONARY VS. NEXUS
‐ Inclusionary and Associated In-Lieu fees have great flexibility ‐ Case law supports inclusionary as a legitimate police power option ‐ Primary compliance is building units on-site, but can allow in-lieu fees and other methods ‐ In-lieu/off-site option can be made more onerous to encourage on-site units ‐ City can adopt standards that fit their market conditions and policy goals ‐ Inclusionary Ordinance becomes part of Zoning Code
‐ Nexus Findings
‐ Most legal opinions suggest that nexus findings are not required for inclusionary housing ‐ Primary compliance would be paying the fee, rather than building units ‐ Fee would be treated as impact fee subject to AB 1600, AB 602, etc. ‐ EPS results are same general magnitude but slightly different than inclusionary scenarios discussed to date
‐ EPS Recommendation:
‐ Focus on inclusionary policy rather than nexus-based fee, but potentially use nexus findings to inform income levels in inclusionary policy
INCLUSIONARY HOUSING ORDINANCE
14 15
9 Economic & Planning Systems EPS PPT Presentation | 16
INCLUSIONARY REQUIREMENTS
What will be the inclusionary requirements (percentage of unit, affordability level) be for different residential development types? Recommendation:
Multifamily – 10% of units affordable to low-income households (70% AMI)*
High-Density Single Family (e.g. Townhomes) - 10% of units affordable to low-income households (70% AMI)*
Low-Density Single Family – 5% of units affordable to moderate- income households (110% AMI)
*These requirements would automatically qualify projects for use of State density bonus Economic & Planning Systems EPS PPT Presentation | 17
EXEMPTIONS TO REQUIREMENT
Should there be projects that are exempt from the inclusionary requirement?
Many cities exempt new residential projects under a certain unit size from inclusionary requirements (e.g. fewer than three units) Many cities exempt projects that are at a certain stage in the development process at the time of adoption of the inclusionary housing ordinance Recommendation
Exempt residential projects with fewer than three units from the inclusionary requirement.
Exempt residential projects that have submitted a complete application by the effective date of the inclusionary ordinance.
16 17
10 Economic & Planning Systems EPS PPT Presentation | 18
AFFORDABILITY TERM
What is the minimum term (in years) of affordability for units? For rental units, a typical affordability term is 55 years including in State density bonus law, although some cities have longer terms. For for-sale units, there are several options:
– The City can set an affordability term – for instance, 45 years – and limit the re-sale of the unit to income-qualified households for the duration of that term – The City can set the affordability term to renew each time the unit is sold – The City can decline to set an affordability term, but rather require an “equity sharing agreement” on the unit.
Recommendation
Set an affordability term of 55 years for rental units Set an affordability term of 45 years for for-sale units, with renewal upon resale if within that period
Economic & Planning Systems EPS PPT Presentation | 19
SIZE OF AFFORDABLE UNITS
Can required affordable units be smaller than market-rate units? Many cities require that inclusionary affordable units should be similar to market-rate units in terms of finishes, features, and access to amenities Some do allow for developers to build affordable units that are slightly smaller (e.g., 10 percent smaller) than the average market-rate unit.
Recommendation
For multifamily rental projects, require on-site or off-site affordable units to reflect the mix of market-rate units (e.g., same proportion of one-bedrooms, two-bedrooms, etc.) and have net leasable areas of at least 90 percent of the average size of the market-rate units of similar bedroom counts. For single family for-sale projects, see next topic.
18 19
11 Economic & Planning Systems EPS PPT Presentation | 20
ALTERNATIVES FOR FOR-SALE PROJECT COMPLIANCE
Can for-sale projects meet their inclusionary requirement by developing affordable rental units?
Some cities allow or even require this because it is considered more feasible and meets a market need
– The number of affordable rental units can equal the number of affordable for-sale units that the developer would have been required to build; OR
– The number of affordable rental bedrooms can equal the number of affordable for-sale bedrooms that the developer would have been required to build
Recommendation
Allow for-sale projects to meet their inclusionary requirement by building affordable rental units on the same site as or within proximity of the primary market-rate project.
Allow the requirement to be met by providing the required number of affordable bedrooms in any configuration, rather than the required number of units similar in size to the market-rate units.
Economic & Planning Systems EPS PPT Presentation | 21
OFF-SITE AFFORDABLE UNITS
Can projects meet their inclusionary requirement by providing affordable units off-site?
Some cities have higher inclusionary requirement for off-site units (e.g., 10% on-site, 13% off-site)
Some cities require that off-site units are within a maximum distance of the market-rate project and not in an area with “overconcentration” of existing affordable units Recommendation
Allow for developers to meet their inclusionary requirement by providing affordable units off-site, and require the number of off-site affordable units be equivalent to a higher proportion of market-rate units than if built on-site.
Define a maximum distance from the market-rate project site for off-site units Develop a definition of overconcentration and restrict the development of off-site affordable units to prevent such overconcentration.
20 21
12 Economic & Planning Systems EPS PPT Presentation | 22
IN-LIEU FEE
Are there any limitations on when a project can pay an in-lieu fee instead of providing on-site or off-site units?
While some cities allow for any residential market-rate project to pay an in- lieu fee instead of providing affordable units, others place limitations on when an in-lieu fee can paid. Some common limitations include:
– In-lieu fee can only be paid on fractional required affordable units – In-lieu fee can only be paid by projects of a particular size or type City can set the in-lieu fee at a level that would incentivize the development of affordable units rather than payment of the fee.
Recommendation
Allow payment of an in-lieu fee only for fractional units required for multifamily and single-family attached projects, but allow in-lieu fees for all inclusionary units required for single-family detached projects of any size.
Economic & Planning Systems EPS PPT Presentation | 23
OTHER ALTERNATIVE MEANS OF COMPLIANCE
What other alternative means of compliance will the City allow? Besides the in-lieu fee, other common alternative means of compliance include:
– Land dedication, often within a certain distance of the market-rate project – Acquisition and rehabilitation of existing units to be rented or sold at affordable levels
– Extension of affordability covenants on existing affordable units These alternative means are often allowed on a discretionary basis Recommendation
Allow developers to propose an alternative means of compliance, subject to Council findings that the alternative provides equal or greater value relative to the standard inclusionary requirements.
22 23
13 Economic & Planning Systems EPS PPT Presentation | 24 Questions/Discussion
Economic & Planning Systems EPS PPT Presentation | 25
COMMITTEE RECOMMENDATIONS
Receive an update on the Inclusionary Housing Program Study for the City of Riverside, including preliminary recommendations on elements of a potential inclusionary housing ordinance; and Provide direction on how to proceed with elements of the Inclusionary Housing Ordinance
24 25
14 APPENDIX
Economic & Planning Systems EPS PPT Presentation | 27
IHP IN COMPARABLE JURISDICTIONS – FOR SALE
0%
2%
4%
6%
8%
10%
12%
14%
16%
Fontana Calimesa Montclair Highland Pomona (Single
Family Detached)
Pomona (Single
Family
Attached/Condos)
Irvine
(Option #1)
Irvine
(Option #2)
San Luis Obispo
(Option #1)
San Luis Obispo
(Option #2)
Very Low 50% AMI Low 60% AMI Low 80% AMI Moderate 120% AMI Note: Fontana and Calimesa do not have inclusionary requirements for rental residential projects. 26 27
15 Economic & Planning Systems EPS PPT Presentation | 28 IHP IN COMPARABLE JURISDICTIONS – RENTAL
0%
2%
4%
6%
8%
10%
12%
14%
16%
Montclair Highland Pomona (On‐Site) Pomona (Off‐Site) Irvine (Option #1)
Irvine
(Option #2)
San Luis Obispo
(Option #1)
San Luis Obispo
(Option #2)
Very Low 50% AMI Low 60% AMI Low 80% AMI Moderate 120% AMI Economic & Planning Systems EPS PPT Presentation | 29
INCLUSIONARY SCENARIOS - RENTAL
Scenarios for multifamily rental include:
– 15% and 10% of units for low-income households
– 10% of units for very low-income households
– In-lieu fee on 10% low-income requirement (~$13,000 per market rate unit) Higher density projects
achieve lower return on
cost, and options for
including affordable
units are limited
Mid-density projects
have more room to
feasibly include
affordable units
Payment of in-lieu fee is
a feasible option
5.65%
5.26% 5.39% 5.26% 5.43%5.51%
5.07% 5.21% 5.11% 5.33%5.52%
5.07% 5.22% 5.12% 5.34%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
No Inclusionary 15% Low 10% Low 10% Very Low In ‐Lieu Fee Mid‐Density Infill Downtown
Return
Threshold:
5.25%
28 29
16 Economic & Planning Systems EPS PPT Presentation | 30 INCLUSIONARY SCENARIOS – FOR SALE TOWNHOMES
Scenarios for for-sale townhomes include:
– 10% of units for low-income households
– 5% of units for very low-income households
– In-lieu fee on 10% low-income requirement (~$17,000 per market rate unit) Townhome projects achieve
yield on cost well above
threshold without affordable
units
Both inclusionary scenarios
and payment of in-lieu fee
would still produce a feasible
yield on cost
21.6%
15.6%
17.2% 16.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
No Inclusionary 10% Low 5% Very Low In ‐Lieu Fee
Return
Threshold:
15%
Economic & Planning Systems EPS PPT Presentation | 31
INCLUSIONARY SCENARIOS – FOR SALE SINGLE FAMILY
Scenarios for single family detached homes include:
– 5% of units for moderate-income households
– 2% of units for very low-income households
– In-lieu fee on 5% moderate-income requirement (~$7,000 per market rate unit) Single family projects just barely
achieve profit margin threshold
without affordable units
Both affordable scenarios and
payment of the in-lieu fee would
produce a barely feasible profit
15.7%
14.4% 14.3% 14.5%
0.0%
5.0%
10.0%
15.0%
20.0%
No Inclusionary 5% Moderate 2% Low In ‐Lieu Fee
Return
Threshold:
15%
30 31