Riverside City Council
April 11, 2023

City °JArts &Innovation
Housing and Homelessness
Committee Memorandum

IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII TO: HOUSING AND HOMELESSNESS

COMMITTEE MEMBERS
DATE: MAY 23, 2022
FROM: OFFICE OF HOMELESS SOLUTIONS WARDS: ALL
SUBJECT: UPDATE ON CITY OF RIVERSIDE INCLUSIONARY HOUSING PROGRAM

FEASIBILITY STUDY
ISSUE:

Receive an update related to the City of Riverside Inclusionary Housing Program study and preliminary recommendations for elements of a potential inclusionary housing ordinance.

RECOMMENDATIONS:

That the Housing and Homelessness Committee:

1. 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

2. Provide direction on the recommendations listed in Attachment 4 to be included in an Inclusionary Housing Ordinance to be considered by the City Council.

BACKGROUND:

In recent years, the State of California has identified the shortage of housing, particularly affordable housing, as a legislative priority. A housing shortage impacts the State' s economy, contributes to homelessness, and results in long commutes, increasing production of greenhouse gas emissions, air pollution, and poor public health. Affordable housing is defined as rent/ utilities or mortgage/ taxes/ insurance/ utilities that cost 30% or less of the gross household income and are available to persons who earn at or below 80% of the Area Median Income ( or $63,200 for a family of four in 2021). The State further delineates affordability levels for " low-income" households, earning between 50% and 80% of the Area Median Income; and for " very -low income" households, earning between 30% and 50% of the Area Median Income. The State also defines households earning " moderate incomes," between 80% and 120% of Area Median Income.

Facing a rise in local rents and housing costs, a steady rise in homelessness, and a decrease in homeownership associated with the high cost of housing, on May 18, 2021, the City Council and Housing Authority Board authorized the award of an Agreement with Economic & Planning

Attachment 5
Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 2 Systems, Inc., ( EPS) to explore the possibility of implementing an inclusionary housing policy in the City of Riverside.

By definition, inclusionary housing policies are local policies that could require developers to sell or rent a percentage of new residential units to lower- income residents or pay an in -lieu fee to support the development of such units. To offset the cost of providing affordable housing in all new projects, an Inclusionary Housing Program can offer incentives to developers in the form of zoning concessions such as reduced parking, density bonuses, or tax abatements. Developers can also be given an option to choose an alternative to providing the affordable units in the form of in -lieu fees or providing affordable units at an alternate location. Inclusionary Housing Programs can include both for - sale and rental units and are often implemented through the jurisdiction' s zoning code.

On September 28, 2021, City staff and EPS presented to the Housing and Homelessness Committee the initial analysis of the development feasibility impacts of a range of inclusionary policy alternatives on new market -rate residential development. At that meeting, the Committee directed Housing Authority staff and EPS to proceed with the next steps of the study, including stakeholder and community outreach.

On February 28, 2022, City staff and EPS presented to the Housing and Homelessness Committee on refined analysis of development feasibility impacts of a range of inclusionary policy alternatives on new market - rate residential development, as well as stakeholder outreach undertaken as part of the study effort. City staff and EPS provided the Housing and Homelessness Committee with recommendations for a potential inclusionary housing requirement for the City. At the meeting, the Committee provided guidance on several elements of a potential inclusionary housing program and directed City staff and EPS to develop a draft inclusionary housing policy for Committee consideration and discussion.

DISCUSSION:

Nexus Study
At the City' s request, EPS has prepared a nexus study that illustrates the impact that new market - rate housing can have on the need for affordable housing. The relationship is based on the idea that the occupants of new housing units in Riverside will require goods and services, and the number of employees needed to provide those goods and services can be expected to grow accordingly. Based on the typical incomes of workers in the retail and service industries, many workers will qualify for housing at moderate- or lower- income pricing. The scale of this increased demand will be affected by the incomes of the occupants of the new market - rate housing units, because higher -income households tend to spend more, creating more service industry jobs than available workers.

Using prevailing market - rate pricing for apartments, single- family attached homes ( or townhomes), and single- family detached homes in Riverside, EPS estimated the incomes required to rent or purchase such units, and then applied consumer expenditure survey data to those income levels to estimate the new household spending and therefore revenues that would be expected in different types of businesses. EPS then used established industry - specific ratios of revenues to wages to estimate the number of employees that would be added in the local economy.

Not every employee will form a unique household, as many will live with another working adult and others at younger ages may be expected to still live with their parents, so the number of new

Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 3 households attributed to this new spending is well below the number of new employees. The estimated incomes of those new employee - based households determine the proportion of affordable housing demand that can be attributed to new market -rate housing growth.

For example, a household buying a typical new single- family detached home in Riverside is likely to earn about $ 129, 000 based on the average home price of $ 625, 000. That same household can be expected to spend about $ 6,600 annually eating at restaurants (" food away from home"), so 1,000 such households ( scaled up to make the math more understandable) would spend about

6.6 million in that category. That spending would support roughly 95.4 workers in "food services and drinking places," and those workers can be expected to form roughly 41.7 households that would qualify as " low income." Similar relationships in other spending categories determine the aggregate impact that the typical new homebuying households are likely to have on demand for affordable housing in Riverside.

The inclusionary housing nexus study supports the following inclusionary requirements:

Multifamily: 12.6% total, including 8.0% of units affordable to low- income households and

4. 6% of units affordable to moderate - income households High- Density/ Attached Single Family ( e.g., Townhomes): 10. 6% total ( rounded), including

6. 4% of units affordable to low- income households and 4. 3% of units affordable to moderate - income households
Low- Density/ Detached Single Family: — 14. 4% total, including 9. 1% of units affordable to low- income households and 5. 3% of units affordable to moderate - income households The nexus study further details and informs discussions regarding the appropriate proportions and income levels for the inclusionary housing ordinance.

If the City moves forward with an Inclusionary Housing Ordinance, these inclusionary requirements would be codified in Title 19 — Zoning. However, there is no legal obligation for the City to constrain itself to the results of the nexus study, as inclusionary housing ordinances have not been subject to the requirements of the Mitigation Fee Act and are authorized and recognized by State and case law as an allowable expression of the City' s " police powers" to regulate development in the public interest.

Inclusionary Housing Ordinance Elements
EPS and City staff have been collaborating on a draft inclusionary housing ordinance for consideration by the Planning Commission and City Council. There are several elements of the ordinance that require additional decisions by the Committee, as detailed below:

1. Inclusionary Requirements
Decision Point: What will be the inclusionary requirements ( percentage of unit, affordability level) be for different residential development types?
Options: EPS' s feasibility analysis looked at four types of residential products: low-density single- family, high-density single- family ( aka townhomes), mid -density multifamily, and high- density multifamily. The feasibility analysis was conducted at a variety of inclusionary percentage and affordability levels ( see Attachment 1, Figures 1- 3), which indicated that multifamily rental and higher -density single- family attached projects ( e.g., townhomes) are more likely to be able to support inclusionary units than are lower -density single- family detached projects

Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 4 EPS also looked at the inclusionary requirements of other cities in and around the Inland Empire, as illustrated in Attachment 2, Figures 4 and 5.

The City can adopt any mix of percentages and levels desired, including those not analyzed by EPS, but the ordinance may be subject to review by the California Department of Housing and Community Development ( HCD) if the inclusionary standards exceed 15% of units at low income.

Recommendation: Based on EPS' s market and development feasibility analysis, the following recommended inclusionary requirements were provided at the February 28, 2022 Housing and Homelessness Committee Meeting:

Development Type of Units Affordability Level
Multifamily 10%
Lo°w- income
70 /° of Area Median Income ( AMI)
High -Density Single Family
e. g., Townhome)
10%
Low- income
70% of AMI
Low -Density Single -Family 5%
Moderate - income
11 0% of AMI
These requirements would automatically qualify projects for use of State density bonus These suggested levels are also within the demand - based parameters established through the nexus study. At these levels, Riverside' s inclusionary standards would generally fall within the range of other Southern California jurisdictions surveyed but would be on the lower/ less aggressive end of that range.

2. Exemptions to Inclusionary Housing Requirement
Decision Point: Should there be projects that are exempt from the inclusionary housing requirement?
Options: Many cities exempt new residential projects under a certain unit size from inclusionary housing requirements. For example, in the City of Pomona, projects with fewer than three ( 3) dwelling units are exempt from inclusionary housing requirements. Other cities exempt projects with fewer than six units, or fewer than ten units. Depending on the adopted inclusionary housing percentage, smaller projects may only be required to provide a fraction of a unit; in this case, many cities allow the project to pay an in -lieu fee on the fractional unit required.

It is also common to exempt projects that are at a certain stage in the development process at the time of adoption of the inclusionary housing ordinance, in recognition that the developer was not able to factor the requirement into their financial considerations before submittal. For example, the City may exempt any project that has submitted a complete application by the time of adoption or other effective date, and only any new application after that time would be subject to the requirement.

Recommendations:

1. Exempt residential projects with fewer than three units from the inclusionary housing requirement.

2. Exempt residential projects that have submitted a complete application ( i.e., the project is ready to be considered by the approval authority) by the effective date of the inclusionary housing ordinance.

Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 5

3. Affordability Term
Decision Point: What is the minimum term ( in years) of affordability for affordable units? Options: Most inclusionary programs set a minimum amount of time that affordable units must stay affordable. Some options for these terms include:

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:
o The City can set an affordability term — for example, 45 years, which is the standard in State density bonus law — and limit the re - sale of the unit to income - qualified households for the duration of that term
o The City can set the affordability term to renew each time the unit is sold. o The City can decline to set an affordability term, but rather require an "equity sharing agreement" on the unit. This would allow the income - qualified buyer to sell the unit at market rate. However, the City would recoup some portion of the sale price, which could be reinvested into new affordable housing. The benefit of this approach is that it allows lower- income households to benefit from building equity in the unit. The drawback is that once the unit is sold, it is no longer part of the City's affordable housing stock and the City' s share of the equity from the unit' s resale may be inadequate to subsidize that unit' s replacement.

Recommendation: Set an affordability term of 55 years for rental units and 45 years for for -sale units. This approach aligns with State density bonus law.

4. Size of Affordable Housing Units
Decision Point: Can required affordable housing units be smaller than market -rate units? Options: The Housing and Homelessness Committee provided direction that inclusionary housing affordable units should be similar to market -rate units in terms of finishes, features, and access to amenities. Many cities have similar requirements but do allow for developers to build affordable units that are slightly smaller ( e.g., 10 percent smaller) than the average market - rate unit. For example, this flexibility is allowed in the inclusionary housing ordinances in the cities of Pomona and South Pasadena.

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.

5. For -Sale Projects Meeting Requirement with Affordable Housing Rental Units Decision Point: Can for -sale projects meet their inclusionary housing requirement by developing affordable housing rental units?
Options: Under the premise that rental multifamily units may be the most cost- effective format for providing affordable housing, some cities allow developers of for -sale single- family residential projects to meet their inclusionary requirement by building affordable rental units, either on the same site as the market -rate project or elsewhere in the City. Both the cities of South Pasadena and Pomona provide this option.

Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 6 If this option is used, the City can require that the number of affordable rental units is equal to the number of affordable for -sale units that the developer would have been required to build; or they can require that the number of affordable rental bedrooms is equal to the numbers of affordable for -sale bedrooms that the developer would have been required to build if they had built units similar to the market - rate units. For example, if a for - sale project includes 100 four- bedroom homes, and the inclusionary requirement is 10%, the project would be required to provide 10 affordable units. If they are built as four- bedroom homes, that would equal 40 affordable bedrooms. If the developer built affordable rental units instead, they could be required to build 40 affordable bedrooms in any configuration ( e.g., 20 two- bedroom rental units or 40 one - bedroom units), rather than 10 affordable four- bedroom rental units.

Recommendation: Allow for -sale projects to meet their inclusionary requirement by building affordable rental units on the same site as the market -rate project or elsewhere in the City within reasonable proximity of the primary project ( see below). 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.

6. Off -Site Affordable Housing Units
Decision Point: Can residential projects meet their inclusionary housing requirement by providing affordable housing units off-site?
Options: Some cities allow developers to meet their inclusionary requirement by building affordable units elsewhere in the City, rather than as part of the market -rate project. In some cases, the inclusionary requirement is higher if the units are built off- site. For instance, the City of Pomona requires that 13 percent of units are affordable to moderate - income households if built as part of the market - rate project, but if the affordable units are built off- site, the number of affordable units must be equivalent to 15 percent of the market - rate units and must be affordable to low- income households.

Some cities also require that the off- site affordable units be within a maximum distance from the market - rate project ( e. g., within two miles), and that the off- site affordable units cannot be built in an area with an "overconcentration" of existing affordable units. For example, the City of Pomona' s inclusionary housing ordinance specifies that " The inclusionary units shall not create an overconcentration of deed restricted affordable housing units in any specific neighborhood. For purposes of this section, " overconcentration" is defined as more than 50 deed restricted very low or low-income dwelling units within 1/4 mile of the site of the proposed inclusionary units, or more than 200 of such units within '/ 2 mile of the site of the proposed inclusionary units.

Recommendation: Allow developers to meet their inclusionary housing requirement by providing affordable housing units off-site. Require that the number of off-site affordable housing units be equivalent to a higher proportion of the market -rate units than if the inclusionary requirement is met on- site. Define a maximum distance from the market - rate project site for the off- site affordable units. Develop a definition of overconcentration and restrict the development of off- site affordable units to prevent overconcentration of these units.

7. In - Lieu Fee
Decision Point: Are there any limitations on when a project can pay an in -lieu fee instead of providing on- site or off-site affordable housing units?

Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 7 Options: The City is required to provide alternative means of compliance with the inclusionary housing requirement. An in -lieu fee is a common alternative means, and EPS has calculated the in -lieu fees that would be aligned with the recommended inclusionary requirements ( and can re- calculate depending on the requirements adopted). 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 be paid. Some common limitations include:

In -lieu fee can only be paid on fractional required affordable units ( e.g., a 12 - unit project with a 10% requirement would build one affordable unit and pay the in -lieu fee on the additional 0. 2 required units).

In -lieu fee can only be paid by projects of a particular size ( e.g., smaller than certain number of units) or particular type ( e.g., only for -sale projects or only rental projects) The City also has the discretion to set the in -lieu fee at a level that would incentivize the development of affordable units rather than payment of the fee. For example, the on- site inclusionary requirement could be 10% of units at low income, but the off- site requirement and in - lieu fee could be calculated to reflect 12% of units at low income.

During the stakeholder outreach with market -rate and affordable housing developers alike, there was significant interest in allowing in -lieu fees liberally. The market -rate developers believed that fee payments would be less financially onerous, and affordable housing developers indicated that such fees could provide much- needed local matching funds to support their overall financing efforts. However, the City would need to weigh this interest in fee generation with the trade- offs of not having affordable units built at the same time and in the same locations as the market -rate units paying the fees.

Recommendation: Allow payment of an in -lieu fee only for fractional units required for multifamily and townhome projects but allow in -lieu fees for all inclusionary housing units required for single- family detached projects of any size.

8. Other Alternative Means of Compliance
Decision Point: What other alternative means of compliance will the City allow? Options: In addition to 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; and/ or
Extension of affordability covenants on existing affordable units.

These alternative means are often allowed on a discretionary basis, to be determined by the City Council or other body. The deliberation to accept or reject such alternative means frequently involves both qualitative and quantitative considerations, ultimately resulting in a determination that the alternative means equals or exceeds the "value" of the standard inclusionary requirement.

In this case, the perceived " value" can be based on the number of affordable units, their income levels, the ability to provide affordable units for underserved populations or neighborhoods, the challenges of replacing existing lower- priced units, etc. However, as a discretionary action rather than a prescribed formula, it can be difficult for developers to predict what alternatives will and will not be accepted, introducing risk and uncertainty as well as the potential perception of arbitrary decision- making.

Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 8 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.

STRATEGIC PLAN ALIGNMENT:

This item contributes to Strategic Priority 2: Community Well - Being and Goal No. 2.1 - Facilitate the development of a quality and diverse housing supply that is available and affordable to a wide range of income levels.

This item aligns with each of the five Cross - Cutting Threads as follows:

1. Community Trust — The initiative to explore an inclusionary policy merges best practices in policy development with intensive outreach and communication with both the development community and public to be transparent and make decisions based on sound policy, and inclusive community engagement based on timely and reliable information.

2. Equity — Inclusionary Housing promotes the integration of affordable housing into the City' s market rate stock which allows people of different races, backgrounds, and economic circumstances to live throughout Riverside, lessening the concentration of poverty and broadening the experiences of those who live in affordable/ market mixed units.

3. Fiscal Responsibility — By tapping local development resources to ensure a balanced housing market, Riverside is a prudent steward of public funds and ensures responsible management of the City' s financial resources while providing quality of life to all residents.

4. Innovation — Exploring inclusionary housing potentially creates a development tool to address changing needs and prepares for the future through collaborative partnerships and adaptive processes in consultation with the public and development community.

5. Sustainability & Resiliency — By creating a balanced housing market, Riverside is ensuring a balanced economy that serves all income levels of city residents but does not sacrifice growth.

FISCAL IMPACT:

There is no fiscal impact associated with the report.

Prepared by: Michelle Davis, Housing Authority Manager
Certified as to
Availability of funds: Edward Enriquez, Interim Assistant City Manager/ Chief Financial Officer/ Treasurer
Approved by: Lea Deesing, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Attachments:

1. Feasibility Analysis

Update on City of Riverside Inclusionary Housing Program Feasibility Study • Page 9

2. Sample of Inclusionary Housing Standards

3. Nexus Study

4. Committee Recommendation

5. Presentation

ATTACHMENT 1

FEASIBILITY ANALYSIS
Figure 1: Feasibility Analysis for Multifamily Rental Development

6. 00%

5. 00%

4. 00%

3. 00%

2. 00%

1. 00%

0. 00%
65% 05.51% 5.52%
1 No Inclusionary

5.26% 5.07% 5.07% 5.39% 5.21% 5.22%
15% Low 10% Low
Mid - Density Infill Downtown
Return
Threshold:

5. 26% u

5. 25%

5.43% 5.33% 5.34% 5. 11% 5. 12%0
10% Very Low In - Lieu Fee
Figure 2: Feasibility Analysis for High -Density Single Family For -Sale Development Townhomes)

25. 0%

20. 0%

15. 0%

10. 0%

5. 0%

0. 0%

21. 6%
Return
Threshold: 15.6% 15%
No Inclusionary 10% Low

17. 2%

16. 3%
5% Very Low In - Lieu Fee
Figure 3: Feasibility Analysis for Low -Density Single Family For -Sale Development

20. 0%
Return
Threshold:

15. 7% 15%

15. 0% — — -- 14. 4% 4. % 14. 5%

10. 0%

5. 0%

0. 0%
No Inclusionary 5% Moderate

2% Low In - Lieu Fee
i
ATTACHMENT 2

SAMPLE OF INCLUSIONARY HOUSING STANDARDS
Figure 4: Selected Sample of Inclusionary Standards for For -Sale Housing 16%
14%
12%
10%
8%
4%
2%
O%
Fontana
1Calimesa Montclair Highland Pomona ( Single Pomona ( Single Irvine Irvine San Luis Obispo San Luis Obispo Family Detached) Family ( Option P11 ( Option fit) ( Option 11) ( Option 52) Attached/ Condos)
Very Low SO%AMI • Law 60% AMI O% 4M1 = x Moderate 12056 AMI No, Fontana and [' Mimosa do not hove inelusionory requirements for rental' resrden0ol profee, Figure 5: Selected Sample of Inclusionary Standards for Rental Housing 1696
1416
12%
10° 6
s 6
696
496
296
1 h
1 1
1 Montclair Highland Pomona ( On- Pomona ( Off- Irvine Irvine San Luis San Luis Site) Site) ( Option 141) ( Option # 2) Obispo Obispo
Option # 1) ( Option # 2)
Very Low 5095 AMI Low 6U% AMI Low 80% AMI * Moderate 12095 AMI

ATTACHMENT 3

NEXUS STUDY

77u' Economics n/ Lnnrl
Economic & Planning Systems, Inc.
949 South Hope Street, Suite 103
Los Angeles, CA 90015- 1454
213 489 3838 tel
Oakland
Sacramento
Denver
Los Angeles
www. epsys. com
DRAFT Administrative Report
Nexus - Based Affordable
Housing Fee Analysis
Prepared for:

City of Riverside
Prepared by:

Economic & Planning Systems, Inc.

May 5, 2022
EPS # 204046

Table of Contents
EXECUTIVE SUMMARY 1

1. AFFORDABILITY GAP ANALYSIS 7
Product Type 7
Revenue Assumptions 9
Affordability Gap Results 11

2. DEMAND - BASED NEXUS FEE CALCULATION 12
Market - Rate Household Income Levels 12
Demand for Income - Qualified Workers 16
Fee Calculation 18
APPENDIX A: Household Expenditures and Employment Generation Appendix B: Income Levels for Worker Households

List of Figures and Tables
Figure 1 Illustration of Nexus - Based Housing Fee Methodology 2 Table 1 Supportable Nexus - Based Housing Fees or Unit Requirements 6 Table 2 Affordability Gap Analysis 8
Table 3 Income Limits for Affordable Housing 10
Table 4 Required Income for Market - Rate Units 13
Table 5 Summary of Worker and Household Generation per 100 Market - Rate Units 17 Table 6 Nexus - Based Housing Fee Calculations ( For -Rent, Apartment Unit) 19 Table 7 Nexus - Based Housing Fee Calculations ( For -Sale, Townhome) 19 Table 8 Nexus - Based Housing Fee Calculations ( For -Sale, Single - Family Home) 20

Nexus -Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022

EXECUTIVE SUMMARY
Economic & Planning Systems, Inc. ( EPS) was retained by the City of Riverside ( City) to conduct a nexus study analyzing the impact that development of market - rate for - sale and rental housing has on the demand for below - market - rate housing and, based on the results, to determine a nexus - based fee that could be charged to market - rate housing development.

The technical approach used herein quantifies the impacts that the introduction of market - rate units have on the local economy and the demand for additional affordable housing. As new households are added to the community, local employment also will grow to provide the goods and services required by the new households. To the extent that these new jobs do not pay adequate wages for the employees to afford market - rate housing in the community, the new households' spending is creating a need for affordable housing. A nexus - based affordable housing fee is therefore based on the impact of the new market - rate homes on the demand for affordable housing. The fee calculated in this study represents the fee that may be charged to new market - rate housing units to mitigate their impacts on the affordable housing supply. Such fees may be used by the City to subsidize the production of new affordable units for moderate - and lower- income households not accommodated by market - rate projects.

Calculating the impact of market - rate development in the City on affordable housing needs, and the fees needed to mitigate those impacts, involves three main analytical steps:

Step # 1. Estimate the typical subsidy required to construct units affordable at various income levels ( the " affordability gap").

Step # 2. Determine the market - rate households' demand for goods and services, the jobs created by that demand, and the affordable housing needs of workers in those jobs.

Step # 3. Combine the affordability gap with the affordable housing demand projections to compute the supportable nexus - based affordable housing fees per market - rate unit.

These technical steps are illustrated in Figure 1 and detailed in the body of this Report and the attached Technical Appendices. The findings regarding each of these steps are presented below.

Economic & Planning Systems, Inc.
204046 NexusAdminDraft. docx
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Nexus -Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022

1. The costs to construct housing units affordable to many households exceed those units' values based on what the households can afford to pay. The estimated subsidy required to construct affordable housing units in Riverside range from roughly $ 289, 200 for Extremely Low - Income households to $ 42, 000 for Moderate - Income households.

An " affordability gap analysis" evaluates whether or not the costs to construct affordable units exceed the values of units that are affordable to lower- and moderate - income households. For each affordable housing income level— households with incomes at up to 30, 50, 80, and 120 percent of Area Median Income ( AMI)— this analysis estimates the subsidy required to construct affordable housing units.

The affordability gap analysis assumes that the average affordable unit for all income levels will be a 2 -bedroom unit in a multifamily development in a three- story, stacked flats building with an average density of 32 dwelling units per acre.

The estimated costs to construct the prototypical affordable unit are based on EPS market research, including review of recent Riverside development projects and transactions along with other industry - standard development cost data sources, and have been vetted with locally active developers . The cost of land acquisition is included in the development cost calculations.

A household' s ability to pay is estimated based on standard percentages of income available for housing costs at each household income level. Income available for housing costs is then converted into a monthly affordable rent and a capitalized unit value or an affordable mortgage payment and supportable home price. This unit value is then compared to the costs of development to determine the subsidy required to make the unit affordable to each income level.

2. The demand for affordable housing generated by the expenditures of new households in City of Riverside increases along with the market - rate unit value and related owner income). For example, a townhome unit selling for $ 400, 000 is estimated to create demand for 0. 106 affordable housing units, while a single- family home selling for $ 625, 000 creates demand for 0. 144 affordable units. The same relationship between expenditures and affordable housing demand also applies to market - rate rent prices ( and related renter income).

Any justified nexus - based fee is based on the total demand for affordable housing units generated by construction of market - rate homes. The link ( or nexus) between market - rate housing and increased demand for affordable housing is that residents of market - rate units demand goods and services that rely on wage earners ( for example, retail sales clerks) some of whom typically cannot afford market - rate housing and thus require affordable housing.

Because more expensive housing units require owners to have higher incomes, and higher income households create more jobs through their spending, the nexus impacts and thus the justified fees for units vary in relation to the price and rents of the market - rate units. The price or rent of the unit is typically a function of its size, either by square footage or number of bedrooms.

Economic & Planning Systems, Inc.
204046 NexusAdminDraft. docx
3

Z:\ Shared\ Projects1LA1204000s1204046_ Riverside InclusionarylReports\ EPS Nexus -Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022
This analysis evaluates the demand for affordable housing generated by three prototypes that represent the typical development currently being built in the City of Riverside: ( 1) a for - rent, 2 - bedroom, 850 square foot apartment unit; ( 2) a for - sale, 1, 500 square foot attached single- family townhome; and a ( 3) for - sale, 2, 500 square foot detached single- family house.

For each prototype, the demand - based nexus fee calculation involves the following steps:

A. Market - Rate Household Income Levels.

For - Rent Household Income Levels: The expected rental price of the unit is based on market data regarding the actual asking rents of apartments of various sizes. The required income levels of households occupying new market - rate housing are derived based on the rental rate, assuming standard housing cost expenses as a proportion of overall household income. For example, a typical household renting a market - rate two- bedroom, 850 square foot unit for $ 2, 600 per month would have an income of roughly 112, 600, if they spent 30 percents of their income on housing costs ( rent and utilities).

For - Sale Household Income Levels: The required income levels of households occupying new for -sale market - rate housing are derived based on the unit' s mortgage, property taxes, HOA dues, insurance, and utilities, assuming standard housing cost expenses as a proportion of overall household income. For example, a typical household purchasing an average for - sale market - rate townhome for $ 400, 000 would have an income of roughly $ 92, 200, if they spend 35 percent2 of their income on housing costs. A typical household purchasing an average for - sale market - rate single family home for 625, 000 would have an income of roughly $ 129, 400.

B. Household Expenditures. Based on the household income computed in Step A, Consumer Expenditure Survey data is used to evaluate the typical spending patterns of the household. This analysis provides an estimate of how much the household spends on specific categories of expenditures, such as " Food at Home." The survey consists of two components — the Interview Survey and the Diary Survey — each with its own sample representative of the broader population, including distinctions by income level. The surveys collect data on expenditures, income, and consumer unit characteristics. As the households' income increases with the value of the market - rate units, the total spending on goods and services also increases. The Consumer Expenditure Survey also indicates that these relationships are not linear ( e. g., a household with twice the income does not necessarily spend twice as much on food). While expenditures do increase with income, the relationship is not linear ( i. e., household expenditures do not increase at the same proportion that incomes go up).

C. Job Creation and Worker Households. Having estimated the households' spending on various items, that spending is then converted into an estimate of jobs created. For each 1 California Health and Safety Code Section 50053 specifies that affordable housing cost for rental units is 30 percent of gross income for all income categories. 2 California Health and Safety Code Section 50052. 5 states that affordable housing cost for for -sale units should not exceed 35 percent of gross household income for all income levels.

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expenditure category, data regarding average worker wages and the ratio between gross business receipts and wages are used to translate these household expenditures into the total number of private - sector workers. Because each new worker does not represent an independent household ( Riverside has an average of 2. 00 workers per working household according to the US Census Bureau' s American Community Survey), the total number of new households created is somewhat less than the number of new jobs created. This analysis assumes that workers form households with others with similar wages. EPS has further adjusted the household formation rates to reflect the fact that a certain proportion of workers will not form their own households, particularly those of younger ages. 3 D. Worker Households by Income Category. Each worker household generated is assigned to an income category— represented as a proportion of AMI ranging from 30 to 120 percent— based on its estimated gross wages. This provides the total number of households generated at each income level by construction of market - rate units at various price points. The results indicate that residents of smaller, lower- priced units generate fewer worker households requiring affordable housing than do residents of larger, higher - priced units.

These steps of the nexus - based fee calculation provide the total number of income - qualified workers required to meet the needs for goods and services generated by market - rate housing. The number of workers servicing market - rate housing ( at each unit type) is then converted to total income qualified households and each such household is assumed to require one housing unit.

3. This analysis calculates the nexus - based fees that could fully mitigate the impact that new market - rate housing has on Riverside' s affordable housing demand at various representative housing types. These fees could range from about $ 11, 700 for a rental unit or $ 13. 72 per square foot, $ 9, 600 for a for - sale townhome or $ 6. 37 per square foot, or $ 13, 400 for a for - sale single- family unit or $ 5. 36 per square foot.

The nexus fee is calculated by applying the number of affordable units needed by income qualified households to the affordability gap for each housing income category. This calculation is made for several different home values, as shown in Table 1. Should the City prefer to adopt a flat fee per square foot rather than a per unit fee, this analysis suggests that the nexus - based fee could be $ 13. 72 per square foot for a rental apartment unit, $ 6. 37 per square foot for a for - sale townhome, and $ 5. 36 per square foot for a for - sale single family unit.

The City may also consider whether to allow developers to provide affordable units within their projects, rather than paying the nexus - based fee. Table 1 illustrates the proportions of affordable units that correspond to the fee calculation and demands created by the market - rate units. For instance, an apartment project with market - rate rents would effectively mitigate the demand being created by the market - rate units if it provided 0. 126 affordable 3 BLS data indicates that 12. 5% of retail/ restaurant workers are age 16- 19, but an average of only

1. 9% of workers overall ( this factor is applied to other industries). EPS has assumed that such young workers do not form their own households.

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units for each market - rate rental unit. Alternatively, to mitigate the demand being created by a market - rate for - sale townhome or single- family unit, the developer must provide 0. 106 or

0. 144 affordable units, respectively.

It is understood that a lower fee level below the nexus - based fee may be appropriate given a range of development feasibility and economic development considerations, and the City' s preference to incentivize rental housing.

Table 1 Summary of Supportable Nexus - Based Housing Fees or Unit Requirements
Unit Type
Nexus - Based Fees Unit Requirements by Income Level
Fee per Fee per ELI VLI Low Moderate Total
Unit Sq. Ft. [ 1] (< 30% ofAMl) (< 50% ofAMI) (< 80% ofAMl) (< 120% ofAMI) Rental
Apartment Unit $ 11, 666 $ 13. 72 0. 0%
For - Sale
Townhome
Single -Family
9, 558
13, 405

6. 37 0. 0%

5. 36 0. 0%

0. 0% 8. 0% 4. 6% 12. 6%

0. 0% 6. 4% 4. 3% 10. 6%

0. 0% 9. 1% 5. 3% 14. 4%
1] Based on square footage of prototypes used for the feasibility study ( 850 sq.ft. for apartment units, 1,500 sq.ft. for townhomes and 2,500 sq.ft. for single- family homes.

Source: Economic & Planning Systems, Inc.

4. While a nexus - based relationship is not typically required for cities to adopt inclusionary housing standards, Table 1 shows that the City of Riverside could justify an inclusionary requirement of 12. 6 percent for rental units, 10. 6 percent for for - sale townhomes, and 14. 4 percent for for - sale single- family units from a nexus perspective.

Inclusionary ordinances in California vary widely but commonly require 10 to 15 percent affordable units. California jurisdictions commonly adopt inclusionary standards based on policy preferences rather than nexus analysis such as this report, but this analysis indicates that the impact of new for - sale housing could justify an inclusionary requirement of 12. 6 percent for rental units, 10. 6 percent for for - sale townhomes, and 14. 4 percent for for - sale single- family units. Table 1 also suggests that low- income units represent a large portion of the units demanded based on the spending of new rental and for - sale housing occupants, but again jurisdictions commonly adopt inclusionary housing income standards based on considerations other than the nexus - based impact.

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1. AFFORDABILITY GAP ANALYSIS
For any nexus -based affordable housing fee calculation, it is necessary to estimate the subsidy required to construct affordable housing units. Table 2 shows the subsidy needed to produce housing that is affordable to extremely low-, very low-, low-, and moderate - income households 30 through 120 percent of AMI).

Product Type
While the nexus fees calculated herein are based on demands created by market - rate rental housing, the analysis assumes that new lower- income worker households would actually be housed in developments that contain all affordable units. The affordable units are assumed as apartments at 32 units per acre with surface parking, reflecting a typical density of multifamily projects developed in Riverside.

In order to determine the average household size of future affordable housing units, EPS looked at the American Community Survey ( ACS) 2020 5 -Year Estimate— the average household size for working households in Riverside is 2. 44. Rounding this, EPS compared the estimated household wage with the income thresholds for a 3 -person household to identify the income category into which each occupation would fall for new units.

California State law ( California Health and Safety Code Section 50052. 5) assumes that a 2 -bedroom unit is occupied by a 3 -person household, and this assumption is used in this analysis. Based on the feasibility analysis that EPS completed for the City, a 2 -bedroom rental unit in Riverside has a gross size of about 978 square feet ( accounting for shared lobbies, hallways, etc.) and a net size of 850 square feet. This analysis estimates the subsidy that would be required to build for - rent housing for the lower- income worker households ( for - sale units are assumed to be larger).

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Table 2 Affordability Gap Analysis
Item
3 -Story Multifamily Building With Surface Parking
Extremely Low Very Low Low Moderate
Income Income Income Income
30% AMI) ( 50% AMI) ( 70% AMI) ( 110% AMI)
Development Program Assumptions
Density/ Acre [ 1] 32 32 32 32
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 [ 2] 3 3 3 3
Parking Spaces/ Unit 1. 00 1. 00 1. 00 1. 00
Cost Assumptions
Land/ Acre [ 3] $ 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 [ 4] $ 205 $ 205 $ 205 $ 205 Direct Construction Costs/ Unit $ 200, 000 $ 200, 000 $ 200, 000 $ 200, 000 Parking Construction Costs/ Space $ 5, 000 $ 5, 000 $ 5, 000 $ 5, 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 [ 5] 35% 35% 35% 35% Indirect Costs/ Unit $ 71, 750 $ 71, 750 $ 71, 750 $ 71, 750 Developer Fee (% of all costs)
Fee Amount
Total Cost/ Unit ( rounded)
Maximum Supported Home Price
Household Income [ 6] $ 21, 960 $ 35, 550 $ 49, 802 $ 76, 725 Income Available for Housing Costs/ Year [ 7] $ 6, 588 $ 10, 665 $ 14, 941 $ 23, 018 less) Operating Expenses per Unit/Year [ 8] ($ 4, 500) ($ 4, 500) ($ 4, 500) ($ 8, 568) Net Operating Income $ 2, 088 $ 6, 165 $ 10, 441 $ 14, 450 Capitalization Rate [ 9] 5. 0% 5. 0% 5. 0% 5. 0%
Total Supportable Unit Value [ 10] $ 41, 760 $ 123, 300 $ 208, 812 $ 288, 990 14% 14% 14% 14%
40, 651 $ 40, 651 $ 40, 651 $ 40, 651
331, 000 $ 331, 000 $ 331, 000 $ 331, 000
Affordability Gap 289, 240 $ 207, 700 $ 122, 188 $ 42, 010 1] Based on the mid -density assumption of 32 units per acre. 2] An average of 3 persons is used for this analysis based on the multifamily prototype used in the feasibility study and State law (Health and Safety Code Section 50052. 5) indicates that a 2 -bedroom unit should be assumed to be occupied by a 3 -person household. Thus, EPS has assumed an average unit for income - qualified worker households would be 2 -bedrooms. 3] Per feasibility study for mid -density land costs.
4] Includes on- site work, offsite work, vertical construction, general requirements, overhead and builder fees. The cost estimate reflects wood -frame construction above podium parking.
5] Includes costs for architecture and engineering; entitlement and fees; project management; appraisal and market study; marketing, commissions, and general administration; financing and charges; insurance; developer fee and contingency. 6] Based on 2021 income limits for a three person household in Riverside County. 7] Assumes housing costs to be 30% of gross household income. 8] Operating expenses are generally based on EPS feasibility studies in the region and are inclusive of utility costs; units at or below 80% of AMI are assumed to be built as non-profit and are therefore exempt from property taxes. Property taxes are assumed to comprise a share of the operating expenses for the moderate income category. 9] The capitalization rate is used to determine the current value of a property based on estimated future operating income, and is typically a measure of estimated operating risk.
10] The total supportable unit value is determined by dividing the net operating income by the capitalization rate.

Sources: City of Riverside; CA Department of Housing and Community Development; CoStar; and Economic & Planning Systems, Inc.

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Development Cost Assumptions
Affordable housing development costs include land costs, direct costs ( e. g., labor and materials), indirect or " soft" costs ( e. g., architecture, entitlement, marketing, etc.), and developer profit.

Operating costs, including property maintenance, common utilities, advertising, leasing, and property taxes ( where applicable) also must be incorporated into the analysis. Data from recent Riverside developments and land transactions have been combined with EPS' s information from various market - rate and affordable housing developers to estimate appropriate development cost assumptions. These assumptions are shown in Table 2.

Revenue Assumptions
To calculate the values of the affordable units, assumptions must be made regarding the applicable income level and the percentage of income spent on housing costs. In addition, translating these assumptions into unit prices and values requires estimates of operating expenses, capital reserves, and capitalization rates. The following assumptions were used in these calculations:

Income Levels— This analysis estimates the subsidy required to produce units for households earning 30, 50, 70, and 110 percent of Area Median Income ( AMI) for a three- person household. In 2021, AMI for these households was $ 69, 750 as shown in the California Department of Housing and Community Development' s ( HCD' s) income limits chart as shown in Table 3.

Percentage of Gross Household Income Available for Housing Costs— HCD standards on overpaying for rent indicate that households should pay no more than 30 percent of their gross income on rental housing costs. For this analysis, EPS has assumed that all households shall spend 30 percent of their gross income on rental housing costs.

Operating Costs for Rental Units— The analysis assumes that apartment operators incur annual operating costs of $ 4, 500 per unit, which include the cost of utilities, for units affordable at 80 percent of AMI or below. EPS has assumed the units for moderate income households would have similar operating costs but would be built by for- profit builders and thus also subject to property taxes, increasing their annual operating cost to approximately 8, 600 per unit.

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Table 3 Income Limits for Affordable Housing
Affordability Category
Assumed % of
County Median
Assumed Max. Income [ 1]
3 -person household
Extremely Low Income ( ELI) 0% - 30% $ 21, 960
Very Low Income ( VLI) 50% $ 35, 550
Low Income ( LI) 70% $ 49, 802
Median Income 100% $ 69, 750
Moderate Income ( Mod) 110% $ 76, 725
1] 2021 HCD maximum income thresholds are used to translate employment, wages and total worker household incomes to affordable housing categories and to compute supportable housing costs based on household income levels.

Sources: CA Department of Housing and Community Development; Economic & Planning Systems, Inc.

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Affordability Gap Results
Table 2 shows the estimated subsidies for construction of affordable rental units for extremely low-, very low-, low- and moderate - income households. As shown, an " Extremely Low Income" unit is expected to require a subsidy of $ 289, 200. A " Very Low Income" unit is expected to require a subsidy of roughly $ 207, 700. A " Low Income" unit would require a subsidy for 122, 200, while a " Moderate Income" unit is expected to require a subsidy of $ 42, 000.

These housing affordability gaps then were used to calculate the justified nexus - based fees by multiplying this required subsidy by the number of units required to house workers providing goods and services to new market - rate housing development. This methodology is discussed in more detail in the following chapter.

It is worth noting that the affordability gaps estimated in this analysis range as they might be using other also -valid assumptions. For example, the funding gaps for low- income units assume that prices are set at 70 percent of median income, while State law suggest low- income unit households may earn between 50 and 80 percent of median income. The assumed income level of 70 percent of AMI reflects common practice that affordable housing prices within a given nominal category - in in this case, " Low Income" - be set at a point below the absolute maximum level within the category. For example, State density bonus law sets prices for low- income rentals at 60 percent of AMI, and low- income for - sale housing at 70 percent of AMI.

Similarly, EPS follows State density bonus standards for moderate - income housing by setting the price at 110 percent of AMI rather than the categorical maximum of 120 percent of AMI.

Assuming affordable prices are set at the literal maximum income level in each nominal category would marginally reduce the subsidy required for such units, but would make those homes affordable to only those few households earning the highest possible income within each category.

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2. DEMAND - BASED NEXUS FEE CALCULATION
The supportable nexus -based fees are based on both the affordability gap and the estimated impact that new market - rate units have on the need for affordable units, as reflected in the number of income - qualified local workers required to support the residents of market - rate units and the total subsidy required to construct housing for those workers. This approach is based on the following logic: ( a) residents of rental or for - sale market - rate housing have disposable incomes and require a variety of goods and services, ( b) the provision of those goods and services will require some workers who make lower incomes and cannot afford market - rate housing, and ( c) fees charged to market - rate projects can mitigate the impact of those projects on the increased need for affordable housing.

Market - Rate Household Income Levels
Households with larger incomes typically spend more on goods and services, therefore creating additional lower income jobs, which in turn generate a greater demand for affordable housing.

To assess the impact that market - rate units have on the need for affordable housing, EPS has estimated the household income required to rent a typical 2 - bedroom apartment unit, purchase a 1, 500 square foot townhome, or purchase a 2, 500 square foot single family home as shown in Table 4.

For - Rent Household Income Levels: EPS looked at average rents for a typical 2 - bedroom apartment unit based on projects recently developed in Riverside. The rents for the most recent apartment projects were used, rather than average rents for all apartments, because these newer apartments best represent the rents that can be expected with new market - rate apartment development. Assuming utility costs for a 2 -bedroom unit based on the Housing Authority Utility Allowance for Riverside County, the minimum household income needed to rent each unit is then computed, predicated on the State and federal standard financing assumption that a household will spend 30 percent of their income on housing costs ( rent and utility payments). As shown, required household income for an average apartment unit with a monthly rent of $ 2, 600 is $ 112, 600.

For - Sale Household Income Levels: The income required to purchase a particular unit is based on assumptions of the standard down payment, financing terms, property taxes, utility costs4, and other costs related to owning a home. Per State and federal financing standards, these housing costs typically account for 35 percent of a household' s income, and therefore, by knowing these costs, the required income to purchase each unit can be estimated. As shown, required household incomes under recent market conditions are on average, approximately 92, 200 for townhomes and $ 129, 400 for single family homes. Changes to housing market and financing conditions can have a significant effect on the calculations in this study. 4 Based on the Housing Authority Utility Allowance for Riverside County effective July 2021.

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Nexus -Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022
Household Expenditures and Job Creation by Income
Level
Having established the income requirements for purchasing units at various values, the fee calculation then requires an analysis of the household spending patterns at those required income levels. The Consumer Expenditure Survey from the United States Bureau of Labor Statistics provides data for households at a variety of income levels, detailing the amounts that typical households spend on things like Food at Home, Apparel and Services, and Vehicle Maintenance and Repairs.

Interestingly, household expenditures by category are not uniformly proportional to household income levels. For example, households earning around $ 92, 200 ( adequate to purchase an average 1, 500 square foot townhome) spend roughly 12. 8 percent of their income on food and drink ( at home and eating out), while households earning $ 129, 400 who can afford to purchase a $ 625, 000 single- family unit will spend on 10. 8 percent of their income on food and drink.

Because of these and other differences in proportionate spending, the expenditure profile varies at different income levels.

The homebuyer household' s typical expenditures were converted to the number of jobs created by their spending. The first step in this process is to determine how much of an industry' s gross receipts are used to pay wages and employee compensation. EPS relied on data from the Economic Census, 5 which provides employment, gross sales, and payroll data by industry for Riverside County. In certain instances, where local data was not available for every Economic Census industry, EPS relied on statewide Economic Census data for that industry.

To link the Economic Census data and the Consumer Expenditure Survey data, EPS made determinations as to the industries involved with expenditures in various categories. For example, purchases in the Consumer Expenditure Survey' s " Food at Home" category would likely involve the Economic Census' s " Food & Beverage Stores" industry, where gross receipts were more than ten times the employees' wages. By contrast, purchases in the Consumer Expenditure Survey' s " Entertainment Fees and Admissions" category were attributed to the Economic Census' Arts, Entertainment, and Recreation" industry, where gross receipts are only about four times the employees' wages. Where more than one Economic Census category was attributable to a Consumer Expenditure Survey category, EPS estimated the proportion of expenditures associated with each Economic Census category.

After determining the amount of the household' s expenditures that were used for employee wages, EPS estimated the number of employees those aggregate wages represent. EPS calculated the number of workers supported by that spending using the average wage per worker ( also from the 2017 Economic Census). These wages ranged from a low of roughly 20, 300 per year for workers in the food and drinking services industry ( i. e., restaurants and 5 Note that the Consumer Expenditure Survey data is based on information current as of 2020. The latest data available for the Economic Census was published in 2017. EPS converted all numbers to 2022 dollars using the Consumer Price Index ( CPI) for the San Francisco Metropolitan Statistical Area MSA) from the Bureau of Labor Statistics.

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Nexus -Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022
bars) to a high of approximately $ 79, 900 a year for workers in architectural, engineering, and related services.

A range of occupations and incomes exist in a given industry sector. For instance, the methodology used to generate the tables in Appendix B distinguishes between the typical incomes of workers in different types of retail stores ( e. g., " food and beverage stores" versus general merchandise stores"), rather than assuming all retail sector workers earn the same income. However, the average wage is used for each sub -category of industry employment and represents a reasonable proxy for the range of incomes in that group: while some employees will have higher wages and require lower subsidies, others will have lower incomes and require higher subsidies. Using the average approximates the total housing subsidy needed by workers in that industry.

To calculate the number of households supported by the expenditures of market - rate housing units, EPS estimated the employees' household formation rates. Importantly, employees generated from the increase in housing units do not all form households; some employees, in the retail and food services industries in particular, are young workers and do not form households.

Data from the Bureau of Labor Statistics indicates that 12. 5 percent of retail/ restaurant workers are age 16 to 19, but an average of only 1.9 percent of workers in the workforce overall. EPS applied these discounts to household formation by type of business to get a more accurate calculation of households formed by the employees and the average total incomes of those households.

To get the overall households' income rather than the individual workers', the wages of workers forming households were multiplied by the average of approximately 2. 0 workers per working household in the City of Riverside. 6 This assumption implies the workers in a given household will have roughly equivalent compensation. While certainly there will often be some variation in wages per employee within a household, on average this assumption is reasonable because it implies comparable levels of education and training among all workers in a household. The average household incomes then are allocated to various income categories to estimate the number of affordable housing units demanded in each income category.

A simplified example of these calculations follows:

A. Number of Households ( prototype project) 1, 000
B. Average Household Income ( in the project) $ 125, 000 C. Aggregate Household Income ( A x B) $ 125 million
D. Average Income Spent on Retail ( Consumer Expenditure Survey) $ 40, 000 E. Aggregate Retail Spending ( A x D) $ 40 million
F. Retail Gross Receipts: Payroll Ratio ( Economic Census) 9: 1 G. Estimated Retail Payroll ( E - F) $ 4. 44 million
H. Average Retail Wage ( Economic Census) $ 28, 500
I. Estimated Total Retail Jobs ( G - H) 156
J. Percent Age 20+ ( Bureau of Labor Statistics) 87. 5% 6 Workers per working household based on American Community Survey (ACS) Censusdata current as of 2020. Although ACS data reported is based on historical figures, these figures can vary somewhat based on ongoing revisions to the ACS data.

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K. Total Retail Workers Forming Households 136

3. Average Workers/ Household ( Census Data) 2. 0
K. Estimated Households Created ( K ± 3) 68
L. Average Household Income ( H x 3) $ 57, 000
M. Income Category Moderate - Income ( 80- 120% of AMI) In this simplified example, 1, 000 new market - rate units sold to households earning $ 125, 000 per year would create demand for 68 housing units for retail workers for moderate - income households. Actual calculations and impact distinctions by type of household expenditure for the three home types are shown in the series of tables presented in Appendix A.

Demand for Income - Qualified Workers
The total number of income - qualified households required to support the expenditures of new market - rate units were determined based on the affordable housing income limits from HCD for a 3 - person household. The income limits used to categorize these worker households are based HCD limits for the 30, 50, 80, and 120 percent AMI levels. The number of income - qualified households required to provide goods and services to new housing units is detailed in Appendix B.

The nexus methodology used herein computes the total number of income - qualified households generated by market - rate units ( as shown in Table 5) and calculates the impact fee based on the estimated cost to subsidize the production of units to meet that affordable housing demand.

This analysis assumes that the fees on residential development will fund required affordable housing for all new workers generated.

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SummaryofWorkerandHouseholdGenerationper100Market -RateUnitsIncomeQualifiedHouseholdsTotalWorkerHouseholds [ 2]
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Nexus -Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022
Fee Calculation
The affordability gap analysis quantifies the subsidy required to construct affordable housing at various income levels. Analysis of consumer expenditures that rely on lower wage workers provides an estimate of the total number of income - qualified households generated by new for - sale units. For each category of market - rate units, the nexus - based fee is then calculated by applying the total number of income - qualified households generated to the affordability gap computed for each affordable household income level. The analysis provides the supportable nexus - based fees for new housing development in the City of Riverside.

Tables 6 through 8 show the impact fee calculation by rental units, for - sale attached single- family townhomes, and for - sale detached single- family homes. The total impact fees required for a representative project of 100 units is calculated by multiplying the number of affordable units required per income level by the cost of subsidizing such housing. All income - qualified households are assumed to be housed in multifamily rental units and the subsidies needed are calculated as the affordability gaps shown in Table 2. The resulting nexus - based fee for a market - rate rental unit is $ 11, 700, while a nexus - based fee for a market - rate for - sale attached townhome product is $ 9, 600. The nexus - based fee for a for - sale detached single- family home is 13, 400.

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APPENDICES:

Appendix A: Household Expenditures and
Employment Generation
Appendix B: Income Levels for Worker Households
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Household Expenditures and
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BureauLaborStatistics; 2017EconomicCensus, AmericanCommunitySurvey; andEconomic & Plan Z: \
Shared\ Projects\ tA1204000s1204046_Rivers!
APPENDIX B:

Income Levels for Worker Households
Economic & Planning Systems, Inc. 32
Z: \Shared\Projects\ LA\204000s\ 204046_Riversira / eiary\ Reports\ EPS 204046_ NexusAdminDraft. docx Nexus - Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022
Table B- 1
Income Levels for Worker Households
Worker Household Generation per 1, 000 Units - For - Rent, Apartment Unit Industry
Total Worker Median Moderate Above Moderate
Total Households ELI VLI LI Income Income Income
Workers [ 1] Households Households Households Households Households Households Retail
Unspecified Retail
Food & Beverage Stores
Food Services and Drinking Places
Health and Personal Care Stores
General Merchandise
Furniture and Home Furnishings Stores
Building Material and Garden Equipment and Supplies Dealer Electronics and Appliance Stores
Clothing and Clothing Accessories Stores
Motor Vehicle and Parts Dealers
Gasoline Stations
Sporting Goods, Hobby, and Musical Instrument Stores
Miscellaneous Store Retailers
Nonstore Retailers
Arts, Entertainment, & Recreation
Medical/ Health
Ambulatory Health Care Services
General Medical and Surgical Hospitals
Nursing and Residential Care Facilities
Social Assistance

5. 1 2. 2 0. 0 0. 0 2. 2 0. 0 0. 0 0. 0

21. 4 9. 3 0. 0 0. 0 0. 0 0. 0 9. 3 0. 0

89. 1 38. 9 0. 0 0. 0 38. 9 0. 0 0. 0 0. 0

2. 4 1. 0 0. 0 0. 0 0. 0 0. 0 1. 0 0. 0

5. 6 2. 4 0. 0 0. 0 0. 0 0. 0 2. 4 0. 0

4. 3 1. 9 0. 0 0. 0 0. 0 0. 0 1. 9 0. 0

3. 2 1. 4 0. 0 0. 0 0. 0 0. 0 1. 4 0. 0

7. 3 3. 2 0. 0 0. 0 0. 0 0. 0 3. 2 0. 0

5. 7 2. 5 0. 0 0. 0 2. 5 0. 0 0. 0 0. 0

9. 1 4. 0 0. 0 0. 0 0. 0 0. 0 0. 0 4. 0

4. 4 1. 9 0. 0 0. 0 1. 9 0. 0 0. 0 0. 0

11. 0 4. 8 0. 0 0. 0 4. 8 0. 0 0. 0 0. 0

7. 5 3. 3 0. 0 0. 0 3. 3 0. 0 0. 0 0. 0

7. 4 3. 2 0. 0 0. 0 0. 0 0. 0 0. 0 3. 2

10. 5 4. 6 0. 0 0. 0 0. 0 0. 0 4. 6 0. 0

3. 7 1. 8 0. 0 0. 0 0. 0 0. 0 0. 0 1. 8

2. 2 1. 1 0. 0 0. 0 0. 0 0. 0 0. 0 1. 1

9. 0 4. 4 0. 0 0. 0 0. 0 0. 0 4. 4 0. 0

4. 3 2. 1 0. 0 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 0. 0 Services to Buildings and Dwellings 15. 9 7. 8 0. 0 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 0. 0 2. 0 Real Estate and Rental and Leasing 0. 7 0. 3 0. 0 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 0. 0 Dry Cleaning and Laundry Services 1. 5 0. 7 0. 0 0. 0 0. 7 0. 0 0. 0 0. 0 Auto Repair and Maintenance 10. 6 5. 2 0. 0 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. 0 0. 9 Photographic Services 1. 2 0. 6 0. 0 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 0. 0 Accounting 2. 8 1. 4 0. 0 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. 0 0. 6 Specialized Design Services 1. 1 0. 5 0. 0 0. 0 0. 0 0. 0 0. 0 0. 5 Death Care Services 1. 3 0. 7 0. 0 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_0 0_6
Total Workers and Households 308. 5 140. 7 0. 0 0. 0 79. 6 0. 0 46. 1 15. 0 Total Income - Qualified HH Generated Per 1, 000 Market - Rate Units Total Income - Qualified HH Generated Per 100 Market - Rate Units 125. 7 0. 0 0. 0 79. 6 0. 0 46. 1 0. 0

12. 6 0. 0 0. 0 8. 0 0. 0 4. 6 0. 0
1] Assumes 2.0 workers per worker household in the City of Riverside based on the 2020 American Community Survey. Includes a 12.5% discount for retail and 1.9% discount for other industries to account for workers under age 20.

Source: Economic & Planning Systems, Inc.

Economic & Planning Systems, Inc.
204046 NexusAdminDraft. docx
33 Z:] Shared\ Projects] L4] 204000s] 204046_ Riverside Inclusionary] Reports] EPS

Nexus - Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022
Table B- 2
Income Levels for Worker Households
Worker Household Generation per 1, 000 Units - For Sale, Townhome Unit Industry
Total Worker Median Moderate Above Moderate
Total Households ELI VLI LI Income Income Income
Workers [ 1] Households Households Households Households Households Households Retail
Unspecified Retail
Food & Beverage Stores
Food Services and Drinking Places
Health and Personal Care Stores
General Merchandise
Furniture and Home Furnishings Stores
Building Material and Garden Equipment and Supplies Dealer Electronics and Appliance Stores
Clothing and Clothing Accessories Stores
Motor Vehicle and Parts Dealers
Gasoline Stations
Sporting Goods, Hobby, and Musical Instrument Stores
Miscellaneous Store Retailers
Nonstore Retailers
Arts, Entertainment, & Recreation
Medical/ Health
Ambulatory Health Care Services
General Medical and Surgical Hospitals
Nursing and Residential Care Facilities
Social Assistance

4. 9 2. 1 0. 0 0. 0 2. 1 0. 0 0. 0 0. 0

21. 7 9. 5 0. 0 0. 0 0. 0 0. 0 9. 5 0. 0

81. 4 35. 6 0. 0 0. 0 35. 6 0. 0 0. 0 0. 0

2. 3 1. 0 0. 0 0. 0 0. 0 0. 0 1.0 0. 0

5. 3 2. 3 0. 0 0. 0 0. 0 0. 0 2. 3 0. 0

3. 9 1. 7 0. 0 0. 0 0. 0 0. 0 1. 7 0. 0

2. 7 1. 2 0. 0 0. 0 0. 0 0. 0 1.2 0. 0

6. 4 2. 8 0. 0 0. 0 0. 0 0. 0 2. 8 0. 0

5. 6 2. 4 0. 0 0. 0 2. 4 0. 0 0. 0 0. 0

7. 4 3. 2 0. 0 0. 0 0. 0 0. 0 0. 0 3. 2

4. 1 1. 8 0. 0 0. 0 1. 8 0. 0 0. 0 0. 0

6. 1 2. 7 0. 0 0. 0 2. 7 0. 0 0. 0 0. 0

6. 8 3. 0 0. 0 0. 0 3. 0 0. 0 0. 0 0. 0

7. 4 3. 3 0. 0 0. 0 0. 0 0. 0 0. 0 3. 3

8. 8 3. 9 0. 0 0. 0 0. 0 0. 0 3. 9 0. 0

3. 3 1. 6 0. 0 0. 0 0. 0 0. 0 0. 0 1. 6

2. 0 1. 0 0. 0 0. 0 0. 0 0. 0 0. 0 1. 0

8. 6 4. 2 0. 0 0. 0 0. 0 0. 0 4. 2 0. 0

4. 7 2. 3 0. 0 0. 0 0. 0 0. 0 2. 3 0. 0
Services
Personal and Household Goods Repair and Maintenance 9. 9 4. 8 0. 0 0. 0 4. 8 0. 0 0. 0 0. 0 Services to Buildings and Dwellings 13. 0 6. 4 0. 0 0. 0 0. 0 0. 0 6. 4 0. 0 Waste Management and Remediation Services 3. 9 1. 9 0. 0 0. 0 0. 0 0. 0 0. 0 1. 9 Real Estate and Rental and Leasing 0. 6 0. 3 0. 0 0. 0 0. 0 0. 0 0. 0 0. 3 Personal Care Services 8. 1 4. 0 0. 0 0. 0 4. 0 0. 0 0. 0 0. 0 Dry Cleaning and Laundry Services 1. 5 0. 7 0. 0 0. 0 0. 7 0. 0 0. 0 0. 0 Auto Repair and Maintenance 10. 7 5. 2 0. 0 0. 0 0. 0 0. 0 5. 2 0. 0 Veterinary Services 1. 5 0. 8 0. 0 0. 0 0. 0 0. 0 0. 0 0. 8 Photographic Services 0. 4 0. 2 0. 0 0. 0 0. 0 0. 0 0. 2 0. 0 Educational Services 13. 4 6. 6 0. 0 0. 0 6. 6 0. 0 0. 0 0. 0 Accounting 2. 6 1. 3 0. 0 0. 0 0. 0 0. 0 1. 3 0. 0
Architectural, Engineering, and Related 1. 2 0. 6 0. 0 0. 0 0. 0 0. 0 0. 0 0. 6 Specialized Design Services 1. 0 0. 5 0. 0 0. 0 0. 0 0. 0 0. 0 0. 5 Death Care Services 1. 3 0. 6 0. 0 0. 0 0. 0 0. 0 0. 6 0. 0 Legal Services 1_1 0_5 0_0 0_0 0_0 0_0 0_ 0 0_5
Total Workers and Households 263. 8 119. 8 0. 0 0. 0 63. 6 0. 0 42. 6 13. 6 Total Income - Qualified HH Generated Per 1, 000 Market - Rate Units Total Income - Qualified HH Generated Per 100 Market - Rate Units 106. 2 0. 0 0. 0 63. 6 0. 0 42. 6 0. 0

10. 6 0. 0 0. 0 6. 4 0. 0 4. 3 0. 0
1] Assumes 2.0 workers per worker household in the City of Riverside based on the 2020 American Community Survey. Includes a 12.5% discount for retail and 1.9% discount for other industries to account for workers under age 20.

Source: Economic & Planning Systems, Inc.

Economic & Planning Systems, Inc.
204046 NexusAdminDraft. docx
34 Z: \ shared\ Projects\ LA\ 204000s\ 204046_ Riverside Indusionary\ Reports\ EPS

Nexus - Based Affordable Housing Fee Analysis for For -Sale and For -Rent Housing DRAFT Administrative Report 05/ 05/ 2022
Table B- 3
Income Levels for Worker Households
Worker Household Generation per 1, 000 Units - For Sale, Single - Family Unit Industry
Total Worker Median Moderate Above Moderate
Total Households ELI VLI LI Income Income Income
Workers [ 1] Households Households Households Households Households Households Retail
Unspecified Retail
Food & Beverage Stores
Food Services and Drinking Places
Health and Personal Care Stores
General Merchandise
Furniture and Home Furnishings Stores
Building Material and Garden Equipment and Supplies Dealer Electronics and Appliance Stores
Clothing and Clothing Accessories Stores
Motor Vehicle and Parts Dealers
Gasoline Stations
Sporting Goods, Hobby, and Musical Instrument Stores
Miscellaneous Store Retailers
Nonstore Retailers
Arts, Entertainment, & Recreation
Medical/ Health
Ambulatory Health Care Services
General Medical and Surgical Hospitals
Nursing and Residential Care Facilities
Social Assistance

5. 9 2. 6 0. 0 0. 0 2. 6 0. 0 0. 0 0. 0

24. 5 10. 7 0. 0 0. 0 0. 0 0. 0 10. 7 0. 0
102. 4 44. 8 0. 0 0. 0 44. 8 0. 0 0. 0 0. 0

2. 8 1. 2 0. 0 0. 0 0. 0 0. 0 1.2 0. 0

6. 4 2. 8 0. 0 0. 0 0. 0 0. 0 2. 8 0. 0

5. 0 2. 2 0. 0 0. 0 0. 0 0. 0 2. 2 0. 0

3. 7 1. 6 0. 0 0. 0 0. 0 0. 0 1. 6 0. 0

8. 4 3. 7 0. 0 0. 0 0. 0 0. 0 3. 7 0. 0

6. 5 2. 8 0. 0 0. 0 2. 8 0. 0 0. 0 0. 0

10. 5 4. 6 0. 0 0. 0 0. 0 0. 0 0. 0 4. 6

5. 1 2. 2 0. 0 0. 0 2. 2 0. 0 0. 0 0. 0

12. 7 5. 5 0. 0 0. 0 5. 5 0. 0 0. 0 0. 0

8. 7 3. 8 0. 0 0. 0 3. 8 0. 0 0. 0 0. 0

8. 5 3. 7 0. 0 0. 0 0. 0 0. 0 0. 0 3. 7

12. 0 5. 3 0. 0 0. 0 0. 0 0. 0 5. 3 0. 0

4. 3 2. 1 0. 0 0. 0 0. 0 0. 0 0. 0 2. 1

2. 6 1. 3 0. 0 0. 0 0. 0 0. 0 0. 0 1. 3

10. 4 5. 1 0. 0 0. 0 0. 0 0. 0 5. 1 0. 0

5. 0 2. 4 0. 0 0. 0 0. 0 0. 0 2. 4 0. 0
Services
Personal and Household Goods Repair and Maintenance 13. 6 6. 6 0. 0 0. 0 6. 6 0. 0 0. 0 0. 0 Services to Buildings and Dwellings 18. 3 9. 0 0. 0 0. 0 0. 0 0. 0 9. 0 0. 0 Waste Management and Remediation Services 4. 6 2. 2 0. 0 0. 0 0. 0 0. 0 0. 0 2. 2 Real Estate and Rental and Leasing 0. 8 0. 4 0. 0 0. 0 0. 0 0. 0 0. 0 0. 4 Personal Care Services 10. 4 5. 1 0. 0 0. 0 5. 1 0. 0 0. 0 0. 0 Dry Cleaning and Laundry Services 1. 7 0. 8 0. 0 0. 0 0. 8 0. 0 0. 0 0. 0 Auto Repair and Maintenance 12. 2 6. 0 0. 0 0. 0 0. 0 0. 0 6. 0 0. 0 Veterinary Services 2. 1 1. 0 0. 0 0. 0 0. 0 0. 0 0. 0 1. 0 Photographic Services 1.4 0. 7 0. 0 0. 0 0. 0 0. 0 0. 7 0. 0 Educational Services 35. 3 17. 3 0. 0 0. 0 17. 3 0. 0 0. 0 0. 0 Accounting 3. 2 1. 6 0. 0 0. 0 0. 0 0. 0 1. 6 0. 0
Architectural, Engineering, and Related 1.4 0. 7 0. 0 0. 0 0. 0 0. 0 0. 0 0. 7 Specialized Design Services 1. 3 0. 6 0. 0 0. 0 0. 0 0. 0 0. 0 0. 6 Death Care Services 1. 6 0. 8 0. 0 0. 0 0. 0 0. 0 0. 8 0. 0 Legal Services 1A 0_7 0_0 0_0 0. 0 0_0 0_ 0 0_7
Total Workers and Households 354. 5 161. 7 0. 0 0. 0 91. 5 0. 0 53. 0 17. 3 Total Income - Qualified HH Generated Per 1, 000 Market - Rate Units Total Income - Qualified HH Generated Per 100 Market - Rate Units 144. 5 0. 0 0. 0 91. 5 0. 0 53. 0 0. 0

14. 4 0. 0 0. 0 9. 1 0. 0 5. 3 0. 0
1] Assumes 2.0 workers per worker household in the City of Riverside based on the 2020 American Community Survey. Includes a 12.5% discount for retail and 1.9% discount for other industries to account for workers under age 20.

Source: Economic & Planning Systems, Inc.

Economic & Planning Systems, Inc.
204046 NexusAdminDraft. docx
35 Z:\ Shared\ Projects\ L4\ 204000s\ 204046_ Riverside Indusionary\ Reports\ EPS

ATTACHMENT 4

COMMITTEE RECOMMENDATIONS

1. Proceed with the following inclusionary requirement:

Development Type of Units Affordability Level
Multifamily 10% Low- income, 70% of
Area Median Income
AMI)
High -Density Single Family
e.g. Townhome)
10% Low- income, 70% of
AMI
Low -Density Single -Family 5% Moderate - income,
110% of AMI

2. Exemptions to Inclusionary
a. Exempt residential projects with fewer than three units from the inclusionary housing requirement.
b. Exempt residential projects that have submitted a complete application by the effective date of the inclusionary housing ordinance.

3. Affordability Term: Set an affordability term of 55 years for rental units and 45 years for
a. Rental units: 55 years
b. For - sale units: 45 years

4. Size of Affordable Housing Units
a. 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.

5. For -Sale Projects Meeting Requirement with Affordable Housing Rental Units a. Allow for -sale projects to meet their inclusionary requirement by building affordable rental units on the same site as the market - rate project or elsewhere in the City within reasonable proximity of the primary 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.

6. Off -Site Affordable Housing Units

a. Allow for developers to meet their inclusionary housing requirement by providing affordable housing units off-site. Require that the number of off- site affordable housing units be equivalent to a higher proportion of the market -rate units than if the inclusionary requirement is met on- site. i. Define a maximum distance from the market - rate project site for the off- site affordable units.
ii. Develop a definition of overconcentration and restrict the development of off- site affordable units to prevent overconcentration of these units.

7. In - Lie Fee
a. Allow payment of an in -lieu fee only for fractional units required for multifamily and townhome projects, but allow in -lieu fees for all inclusionary housing units required for single- family detached projects of any size.

8. Other Alternative Means of Compliance
a. Land dedication, often within a certain distance of the market - rate project; b. Acquisition and rehabilitation of existing units to be rented or sold at affordable levels; and/ or
c. Extension of affordability covenants on existing affordable units.

CITY OF RIVERSIDE

INCLUSIONARY HOUSING

PROG RAM STUDY
Housing and Homelessness
Committee Meeting Update
May 23, 2022
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
0 IAGENDA
Studyturly Process To - Date
Overview of Nexus Study
Inclusionary Housing Ordinance Elements Discussion
Next Steps
Economic & Planning Systems EPS PPT Presentation 1
1

1 November 2021

ISTUDY PROCESS TO - DATE
p• EPSengaged by City
May2021Mav 2021
p• EPS preliminary technical analysis
June - August 2021
September 2021
Presentation of preliminary findings to HHC
Meetings with targeted stakeholder groups
1--- Community town hall presentation
January 2022
p• Presentation of preliminary recommendations to HHC
February 2022
1-- • EPSand City staff work on nexus study and ordinance framework March - April 2022
Economic & Planning Systems EPS PPT Presentation I 2
2 1

NEXUS STUDY
3

2 1OVERVIEW 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 201 7, 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 4
4 NEXUS - BASED HOUSING FEE METHODOLOGY
Step#1Affordable Subsidy
Required
Affordability Gap Analysis Unit Value by minus DevelopmentCosts equals Affordability P. Ifnegative
Subsidy Required to Construct
Affordable Units)
Income Level Gap No Subsidy
If positive Required
Step # 2
Affordable Housing
Demand
Generated by Market Rate
Market
Rate Home
Price
Required
Household
Income Level
Household
Expenditures by
Category
Total Workers to
Provide Goods
and Services by
Expenditure
I.

Workers'
Income
Levels and
Household
Formation
Total
Demand for
Affordable
Units for
Housing) Category Workers
Step # 3
Compute ImpactP P
Fee per Market
Rate Unit
Affordability
Gap
Subsidy Required)
multiplied
by
Demand for Affordable
Units for Workers
per market rate unit)
a ualsq
Supportable Nexus - Based
Housin g Fee
per market rate unit)
Economic & Planning Systems EPS PPT Presentation 1 5
5

3 iSTEP1: CALCULATE AFFORDABILITY GAP
3 -Story 1Mid -Density 1Multifamily Rental Surface Parking3 -Story Rental 1Surface Parking Item
Extremely Low Income
30% AMI)
Development Program Assumptions
Density/ Acre 32
Gross Unit Size 978
Net Unit Size 850
Number of Bedrooms 2
Number of Persons per 2 -bedroom Unit 3
Parking Spaces/Unit 1. 00
Cost Assumptions
Land/ Acre $ 435, 600 $ 435, 600
Land/ Unit $ 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
Income Available for Housing Costs/ Year $ 6, 588 $ 10, 665 less) Operating Expenses per Unit/Year ($ 4, 500) ($ 4, 500) Net Operating Income $ 2, 088 $ 6, 165
Capitalization Rate 5. 0% 5. 0%
Total Supportable Unit Value $ 41, 760 $ 123, 300
Very Low Income
50% AMI)
32 978
850
2 3

1. 00
Low Income
70% AMI)
32 978
850
2 3

1. 00
435, 600
13, 613
Moderate Income
110% AMI)
32 978
850
2 3

1. 00
435, 600
13, 613
49, 802
14, 941
4, 500)
10, 441

5. 0%
208, 812
76, 725
23, 018
8, 568)
14, 450

5. 0%
288, 990
Affordability Gap 289, 240 $ 207, 700 $ 122, 188 $ 42, 010 Economic & Planning Systems EPS PPT Presentation I 6
6 ISTEP 2: CALCULATE MINIMUM REQUIRED INCOME
Residential Type
Rental
Apartment Unit
Household Income Estimation
Avg. Monthly Monthly Utility Monthly Rent
Rent [ 1] Costs [ 2] and Utilities
2, 571 $ 245
Annual Rent Min. Required
and Utilities Income [ 3]
2, 816 $ 33, 792 112, 640
Annual Costs
Mortgage Property HOA Home Min. Required
For - Sale Unit Price [ 4] Mortgage [ 5] Payment [ 5] Taxes [ 6] Dues [ 7] Insurance [ 8] Utilities [ 2] 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 8129, 428 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. 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%
7] HOA dues are based on the feasibility study at a monthly rate of $250 per townhome and $ 175 per single family home. 8] Insurance fees are based on the feasibility study at a monthly rate of $ 125 per unit.

Economic & Planning Systems EPSPPT Presentation I 7
7

4 Income Category
STEP 2: HH EXPENDITURES/ EMPLOYMENT GENERATION ( EX. APARTMENT) Minimum Required HH Income for a Market Rate Apartment: $ 112, 640 alceH' Be
Category
CategoryExpenditureperBusiness Type 9 sentlitu
Expenditures pe
000Hats Ree[stoWagesTotaWagesper 1, 000 HH AvgWages Avg. Worke HH Income
Ca/ culafion
Food at Home
Food & Beverage Stores
Food Away From Home
Food Services and Drinking Places
Alcoholic Beverages
Food & Beverage Stores
Food Services and Drinking Places
Housing Maintenance, Repairs, Insurance, Othe 1. 8%
Personal and Household Goods Repair and Mainh
Building Material and Garden Equipment and Supt
Real Estate and Rental and Leasing
Fuel oil and Other fuels 4. 5%
Nonstore Retailers
Water and Other Public Services 1. 0%
Waste Management and Remediation Services
Household Operations Personal Services 0. 6%
Nursing and Residential Care Facilities
Social Assistance
Household Operations Other Household Expenr 1. 3%
Services to Buildings and Dwellings
Housekeeping Supplies 0. 9%
Building Materials and Garden Equipment and Sur
Food & Beverage Stores
a

5. 7%

5. 1%

0. 7%
100%
100%
100%
100%
100%
50%
50%
100%
45%
45%
10%
100%
100%
100%
100%
100%
40%
60%
100%
100%
100%
10%
35%
c d= c * 1, 000 a f= d/ e g h= f/ g
6, 475
6, 475 $ 6, 475, 361 10. 11 $ 640, 760 $ 33, 572 19. 1 87. 5% 5, 714
5, 714 $ 5, 713, 554 3. 40 $ 1, 682, 102 $ 20, 251 83. 1 87. 5% 833
417 $ 416, 547 10. 11 $ 41, 219 $ 33, 572 1. 2 87. 5% 2. 00 0. 5 417 $ 416, 547 3. 40 $ 122, 634 $ 20, 251 6. 1 87. 5% 2. 00 2. 6 2, 020
909 $ 909, 221 3. 50 $ 259, 498 $ 25, 120 10. 3 98. 1% 2. 00 5. 1 $ 50, 291 909 $ 909, 221 9. 06 $ 100, 348 $ 34, 319 2. 9 87. 5% 2. 00 1. 3 $ 68, 707 202 5202, 049 5. 62 $ 35, 969 $ 52, 689 0. 7 98. 1% 2. 00 0. 3 $ 105, 485 5, 111
5, 111 $ 5, 111, 343 13. 81 $ 370, 007 $ 50, 225 7. 4 87. 5% 2. 00 3. 2 $ 100, 551 Above Mod 1, 094
1, 094 $ 1, 093, 768 3. 85 $ 284, 338 $ 71, 299 4. 0 98. 1% 2. 00 2. 0 $ 142, 744 Above Mod 679
272 $ 271, 527 2. 40 $ 113, 255 $ 34, 764 3. 3 98. 1% 2. 00 1. 6 $ 69, 599 Moderate Income 407 $ 407, 290 2. 81 $ 144, 763 $ 33, 376 4. 3 98. 1% 2. 00 2. 1 $ 66, 819 Moderate Income 1, 490
1,490 $ 1, 489, 567 2. 97 $ 500, 803 $ 31, 415 15. 9 98. 1% 2. 00 7. 8 $ 62, 894 Moderate Income 1, 011
101 $ 101, 078 9. 06 $ 11, 156 $ 34, 319 0. 3 87. 5% 2. 00 0. 1 $ 68, 707 Moderate Income 354 $ 353, 772 10. 11 $ 35, 007 $ 33, 572 1. 0 87. 5% 2. 00 0. 5 $ 67, 213 Moderate Income

2. 00

2. 00
k= h* i/ j

8. 3

36. 3
I= 9* j
67, 213
540, 543
67, 213
40, 543
Moderate Income
LI Households
Moderate Income
LI Households
LI Households
Moderate Income
Above Mod
111 1 1 1 1
Total per 1, 000 Market Rate Households 308. 5 140. 7
Economic & Planning Systems EPSPPT Presentation I 8
8 STEP 2: WORKER INCOME LEVELS/ HH FORMATION ( EX. APARTMENT) Industry
RetailUnspecifiedRetailFood & Beverage Stores
Food Services and Drinking Places
Health and Personal Care Stores
General Merchandise
Furniture and Home Furnishings Stores
Building Material and Garden Equipment and Supplies Dealer Electronics and Appliance Stores
Clothing and Clothing Accessories Stores
Motor Vehicle and Parts Dealers
Gasoline Stations
Sporting Goods, Hobby, and Musical Instrument Stores
Miscellaneous Store Retailers
Nonstore Retailers
Arts, Entertainment, & Recreation
Medical/ Health
Total
Workers

5. 1

21.489.12.4

5.64.33.27.35.79. 1

4.411.0

7.57.410.5
Total Worker
Households
ELI
Household
VLI
Households LI Households

2. 2 0. 0 0. 0 2. 2

9. 3 0. 0 0. 0 0. 0

38. 9 0. 0 0. 0 38. 9

1. 0 0. 0 0. 0 0. 0

2. 4 0. 0 0. 0 0. 0

1. 9 0. 0 0. 0 0. 0

1. 4 0. 0 0. 0 0. 0

3. 2 0. 0 0. 0 0. 0

2. 5 0. 0 0. 0 2. 5

4. 0 0. 0 0. 0 0. 0

1. 9 0. 0 0. 0 1. 9

4. 8 0. 0 0. 0 4. 8

3. 3 0. 0 0. 0 3. 3

3. 2 0. 0 0. 0 0. 0

4. 6 0. 0 0. 0 0. 0
Moderate Income
Households

0. 0

9.30.01.0 2.41.91.4

3.20.00.00.00.00.00.04.6 Above Moderate
Income Households

0. 0

0.00.00.0 0.00.00.0

0.00.04.00.00.00.03.20.0 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
ServicesPersonaland 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 06 00 00 00 0O 06
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 9.25,7 Q„Q Q,Q 79.6 40..9 0. 0 Total Income - Qualified HH Generated Per 100 Market - Rate Units i 12. 6 1 0. 0 0. 0 B. 0 4. 6 i 0. 0 Economic & Planning Systems EPSPPT Presentation I 9
9

5 ISUMMARYOF WORKER AND HH GENERATION ( PER 100 UNITS)
Unit Type
Min. Required
HH Income
Total Workers
Generated
Total
Worker HH
Total Income
Qualified HH
Income Qualified Households b Income Cate• o
Extremely
Low Income
Very Low
Income
Low
Income
Moderate
Income
Rental
Apartment Unit
For - Sale
Townhome
Single Family
112, 640 31
92, 176 26
129, 428 35

14. 1

12. 0

16. 2

12. 6 0. 0 0. 0 8. 0 4. 6

10. 6

14. 4

0. 0 0. 0 6A 4. 3

0. 0 0. 0 9. 1 5. 3
Economic & Planning Systems EPS PPT Presentation 10
10 STEP 3: NEXUS - BASED HOUSING FEE CALCULATION ( EX. APARTMENT) Item
Calculation
Affordable Units -
Affordable Units -
Affordable Units -
Affordable Units -
Extremely Low Income
Very Low Income
Low Income
Moderate Income
Affordable Units
Required Per 100
Market - Rate Units
A)

0. 0

0. 0

8. 0

4. 6
Affordability
Gap per
Affordable Unit
Total Nexus - Based Fee Supported
Per 100 Market -
Rate Units
Per Market -
Rate Unit
B) C = A * B)
289, 240
207, 700
122, 188
42, 010
0 0
972, 958
193, 646
Per Square
Feet
D = C / 100) ( E = D / 850)
Total 12. 6 1, 166, 604 11, 666 $ 13. 72
Economic & Planning Systems EPS PPT Presentation 11
11

6 SUMMARY OF NEXUS - BASED FEES
Unit Requirements by Income Level
Rental
Apartment Unit
For - Sale
Townhome
Nexus - Based Fees
per Unit
11, 666
9, 558
Single Family $ 13, 405
Economic & Planning Systems
Per SF

13. 72

6. 37

5. 36
ELI
30% of AMI)
VLI
50% of AMI)
Low
70% of AMI)
Moderate
110% of AMI) Total

0. 0% 8. 0% 4. 6% j 12.6%

0. 0% 0. 0% 6. 4% 4. 3% T 10.6%

0. 0% 0. 0% 9. 1% 5. 3% J 14.4%
EPS PPT Presentation 12
12 INEXUS -BASED RESULTS VS POTENTIAL INCLUSIONARY IN - LIEU Unit Type
Apartment Unit
Nexus - Based
Inclusionary In -Lieu"
Townhome
Nexus - Based
Inclusionary In -Lieu"
Single Family
Nexus - Based
Inclusionary In -Lieu*
Nexus - Based Fees
per Unit
Economic & Planning Systems
11, 666
13, 000
9, 558
17, 000
13, 405
7, 000
Per SF
ELI
30% of AMI)

13. 72

15. 29
637

11. 33

5. 36

2. 80
Unit Requirements by Income Level
VLI
50% of AMI)
Low
80% of AMI)
Moderate
120% of AMI) Total

0. 0% 0. 0% 8. 0% 4. 6% 12. 6%

0. 0% 0. 0% 10. 0% 0. 0% F 10.0%

0. 0% 0. 0% 6. 4% 4. 3% 1 10. 6%

0. 0% 0. 0% 10. 0% 0. 0% 1 10. 0%

0. 0% 0. 0% 9. 1% 5. 3% 1 14. 4%

0. 0% 0. 0% 0. 0% 5. 0% 1 5. 0%
EPS PPT Presentation 13
13

7 1DISCUSSION 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.

EPSresults 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 Economic & Planning Systems EPSPPT Presentation 1 14
14 1

INCLUSIONARY HOUSING ORDINANCE
15

8 1INCLUSIONARY 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 16
16 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.

Economic & Planning Systems EPS PPT Presentation I 17
17

9 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 System' EPS PPT Presentation 15
18 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.

Economic & Planning Systems EPS PPT Presentation I 19
19

10 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 20
20 OFF- SITE AFFORDABLE UNITS
Can projects meet their inclusionary requirement by providing affordable units off- site?
Some cities have higherinclusionary 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.

Economic & Planning Systems EPS PPT Presentation I 21
21

11 1IN - 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 I 22
22 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.

Economic & Planning Systems EPS PPT Presentation I 23
23

12 1
Questions/ Discussion
Economic & Planning Systems EPS PPT Presentation 1 24
24 1COMMITTEE 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
Economic & Planning Systems EPS PPT Presentation I 25
25

13 1
I
1 APPENDIX
26 IIHP IN COMPARABLE JURISDICTIONS - FOR SALE
16%
14%
12%
10%
8%
6%
4%
2%
0%
1 i
1 1
Fontana Calimesa Montclair Highland Pomona ( Single Pomona ( Single Irvine Irvine Family Detached) Family ( Option 41) ( Option 42)
Attached/ Condos)
1San Luis Obispo San Luis Obispo
Option 41) ( Option 52)
Very Low 50% AMI • Low 60% AMI Low 80% AMI • Moderate 12056 AMI Note: Fontana and Calimesa do not hove inclusionary requirements for rental residential projects.

Economic & Planning Systems EPS PPT Presentation I 27
27

14 IIHP IN COMPARABLE JURISDICTIONS - RENTAL
16%
14%
12%
10%
8%
6%
4%
2%
0%
1 IMontclair
Economic & Planning Systems
1 1Highland Pomona ( On - Site) Pomona ( Off - Site) Irvine Irvine San Luis Obispo San Luis Obispo Option 51) ( Option 42) ( Option 411) ( Option 42)
Very Low 50% AMI Low 60% AMI Low 80% AMI • Moderate 120% AMI EPS PPT Presentation I 28
28 1INCLUSIONARY SCENARIOS - RENTAL
Scenarios for multifamily rental include:
1 5% 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)

6. 00%

5. 00%

4. 00%

3. 00%

2. 00%

1. 00%

0. 00%
5'65%5.51%5.52%

5.26% 5.07% 5.07%
1 5.39%5.21%5.22%

I I I I
II II
II II
No Inclusionary 15% Low
Return
Thresho

5.25% 5.43%5.33%5.34% 5.26%5.11%5.12%
10% Low 10% Very Low
Mid - Density Infill Downtown
In - Lieu Fee
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
Economic & Planning Systems EPS PPT Presentation I 29
29

15 IINCLUSIONARY SCENARIOS - FOR SALE TOWNHOMES
Scenarios for for - sale townhomes include: 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)

25. 0%

20. 0%

15. 0% —

10. 0%

5. 0%

0. 0%

21. 6%
Return
Thresh() 15. 6%
15%

17. 2%

16. 3%
No Inclusionary 10% Low 5% Very Low In - Lieu Fee
Economic & Planning Systems
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
EPSPPT Presentation I 30
30 1INCLUSIONARY 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)

20. 0%

15. 0%-

10. 0%

5. 0%

0. 0%
Return
Threshold:

15. 7% 15%

14. 4 %
No Inclusionary 5% Moderate
14_ 5%
2% Low In - Lieu Fee
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
Economic & Planning Systems EPS PPT Presentation I 31
31

16 CITY OF RIVERSIDE
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Pursuant to the City Council Meeting Rules adopted by Resolution No. 23618, the Members of the City Council and the public are reminded that they must preserve order and decorum throughout the Meeting. The City of Riverside is committed to a workplace that requires acceptable behavior from everyone - a workplace that provides dignity, respect, and civility to our employees, customers, and the public.

Date: HHC 5- 23- 22
Item No.: 2
Subject: FW: [External] Commentfor Housing and HomelessnessCommittee From: Elizabeth Ayala < elizabeth. a ala mail. com>
Sent: Monday, May 23, 2022 9:49 AM
To: CityClerkMbx < City Cie rk@ riversideca,. gov_>; Plascencia, Gaby <GPlascencia@riversideca. g2v_>; Cervantes, Clarissa CCervantes@riversideca. gov->; Edwards, Erin < EEdwards@riversidecg. gov_> Subject: [ External] Comment for Housing and Homelessness Committee CAUTION: This email is originated from OUTSIDEof City of Riverside and was not sent by any City Officials or City Staff. Do not click on links or open attachments unless you are expecting the email and know that the content is safe. If you suspect this is a phishing or malicious email, please contact the helpdesk. good morning council members,
I am writing in regards to the inclusionary zoning housing proposals. Thank you for exploring this important topic.

In the recent housing element that just took place identifying locations for homes, we were told that Riverside needs 18,415 homes needed in the city, and that we need 7,906 units that are for Very Low Income and Low income people. This inclusionary policy does not do enough for the needed housing for people below 70% AMI or 80% AMI and below. The inclusionary zoning policy' s impact would be too narrow on the diverse economic situations we have. We need to be more wide & aggressive in scope.

The policy should also require that the payment for an "in -lieu fee" be high enough that you either truly incentivize the construction of affordable units ORactually produce real revenue for affordable housing.

Thank you for exploring this important topic & proceeding with recommendations that Riverside desperately needs.

Elizabeth
cc Mayor
City Council
City Manager
City Attorney
ACMs
Housing Authority Manager
Date: 5- 23- 22
Item No.: 2
From: Maribel Nunez< maribel@inlandeguitypartnership. org> Sent: Monday, May 23, 2022 12:55 PM
To: Edwards, Erin < EEdwards@riversideca. gov>; Plascencia, Gaby <GPlascenciaCEDrivers ideca.gov>; Cervantes, Clarissa CCervantes@ riversideca. gov>
Cc: CityClerkMbx < City Clerk@ riversideca. gov>; Montes, Paloma < PMontes@riversideca. gov>; Ruiz, Araceli ARuiz@riversideca. gov>; Lujano, Miguel < MLuiano@riversideca. gov> Subject: [External] Publiccomments: AgendaItem #2 InclusionaryHousing (Housing & Homelessness cmte) Dear Riverside Housing and Homelessness committee.

My name is Maribel Nunez, I live in Ward 1 and work throughout the city of Riverside. I am hereto speak about Agenda Item #2 Inclusionary housing. In talkingto our Riversideneighborsand readingthroughthe staff recommendationsfor inclusionaryhousingthisiswhy I thinkthe cityshouldto do regardingInclusionary housing ordinance
Inland Equity Partnership' s feedback:

Ofthe 18,415 homesneededinthe city, we need7,906unitsthatarefor VeryLowIncomeandLow incomepeople. This inclusionarypolicy ignoresthe neededhousingfor peoplebelow70% AMI and the 7,906 units that are desperately needed are measured at 80% AMI and below. This inclusionary policy recommendationis very narrow in the population it is addressing. If, for instance, we manage to meet the 18,415 homes from the RHNA, that will be 1,842 of the needed homes for poor people.

The extremely housing cost burdened people who are at 120% AMI will get some benefit if we can get the homes built..

Overall, Inland Equity Partnership (IEP) supports the committee's recommendations. The ,red text are IEP's add ons/ revisions to be added to the committee recommendations documents.

1. Proceed with the following inclusionary requirement:

Development Type of Units Affordability Level
Multifamily 10% Low- income, 70% of Area Median
Income ( AMI)
High -Density Single 10% Low- income, 70% of AMI
Family ( e.g. Townhome)
Low -Density Single -Family 10% ( instead of Moderate - income, 110% of AMI 5%)
2021IncomeLimitsfrom CaliforniaDepartmentof Housingand CommunityDevelopment:
120% AMI is Moderate Incomewhich is for 1 person= $ 65, 100 80% AMI is Low Income which is for 1 person= $ 44, 250
50% AMI is Very Low Income which is for 1person= $27, 650 ( the Economic & Planning Systems, Inc NexusStudyandpolicyrecommendationsdid not includerecommendationsthat wouldaddress housing for people at this level of poverty.)

2. Exemptions to Inclusionary
a. Exempt residential projects with fewer than three units from the inclusionary housing requirement.
b. Exempt residential projects that have submitted a complete application by the effective date of the inclusionary housing ordinance.

3. AffordabilityTerm: Setanaffordabilitytermof 55yearsforrentalunitsand45 yearsfor a. Rental units: 55 years
c. Use an equity sharing agreement instead of a covenant model for the units that are for - sale.

4. Size of Affordable Housing Units
a. Multifamilyrentalprojects: Requireon-siteor off-siteaffordableunitsto reflectthemixof 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.

5. For -Sale ProjectsMeeting Requirementwith Affordable HousingRental Units eI
701
c. Allow for -sale projects to meet their inclusionary requirement by building affordable rental units
d. on the same site or pay an in -lieu fee. Require that the fee be used for affordable units in the same ward.
e.
a. Allow for -sale projects to meet their inclusionary requirement by building affordable rental units on the same site as the market -rate project or elsewhere in the City within reasonable proximity of the primaryproject. Allowthe requirementto bemet by providingthe requirednumberof affordable bedroomsinanyconfiguration, ratherthantherequirednumberof unitssimilarin sizetothe market - rate units.

6. Off -Site Affordable Housing Units
a. Allow for developers to meet their inclusionary housing requirement by providing affordable housingunitsoff-site. Requirethatthenumberofoffsiteaffordablehousingunitsbe equivalent to a higher proportion of the market -rate units than if the inclusionary requirement is met on- site.
i. Define a maximum distance from the market - rate project site for the off- site affordable units.
ii. Develop a definition of overconcentration and restrict the development of off- site affordable units to prevent overconcentration of these units.

7. In -Lie Fee
a. Allow payment of an in -lieu fee but make the fee high enough to truly incentivize the construction of affordable units.

8. Other Alternative Means of Compliance
a. Land dedication, often within a certain distance of the market - rate project; b. Acquisition and rehabilitation of existing units to be rented or sold at affordable levels; and/ or c. Extension of affordability covenants on existing affordable units.

If my public comment can go on the city's public record. Thank you for your time.

Best,
Maribel Nunez cc Mayor
Riverside Resident City Council
Inland Equity Partnership City Manager
Inland Equity Community Land Trust City Attorney
ACMs
OHS Manager