04-11-23 CC Report — Housing and Homelessness Committee, October 23, 2023

City Council Memorandum

TO: HONORABLE MAYOR AND CITY COUNCIL DATE: APRIL 11, 2023

FROM: CITY MANAGER’S OFFICE WARDS: ALL

COMMUNITY & ECONOMIC DEVELOPMENT

DEPARTMENT

SUBJECT: INCLUSIONARY HOUSING WORKSHOP

ISSUE:

Conduct a workshop on Inclusionary Housing.

RECOMMENDATION:

That the City Council direct staff on next steps related to an Inclusionary Housing Policy.

COMMITTEE RECOMMENDATIONS:

On July 27, 2020, the Housing and Homelessness Committee (HHC) received a presentation on inclusionary housing, which is a po licy that requires a prescribed po rtion of the units in any new residential development to be rented or sold at a price that is af fordable to low- to moderate- income households. Following discussion, the Committee unanimously voted to recommend that the City Council and Housing Authority Board hire a consultant to exam ine the feasibility and economic impacts of a potential inclusionary housing program for the City of Riverside.

On September 27, 2021, City staff and the consultant, Economic & Planning Systems (EPS), presented to the HHC the prelimi nary findings regarding the viability of an inclusionary housing policy (HHC Staff Report – Attachment 1). At that meeting, the Committee directed City 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 present ed to the HHC a refined analysis of the development feasibility impacts of a range of inclusionary policy alternatives on new market-rate residential development; stakeholder outreach undertaken; and recommendations for a potential inclusionary housing policy (HHC Staff Report – Attachment 2 and Feasibility Analysis Presentation – Attachment 3). At the meeting, t he HHC provided guidance on several elements of a potential inclusionary housi ng program and directed City staff and EPS to develop a draft inclusionary housing policy for the HHC’s consideration.

On May 23, 2022, the HHC received an update on the inclusionary housing policy, including preliminary recommendations on elements of a potential inclusionary housing ordinance whereby Inclusionary Housing Workshop ● Page 2
the Committee made the recommendations list ed in Attachment 4 (HHC Staff Report – Attachment 5).

On October 24, 2022, the HHC received an update on Inclusionary Housing and requested that it be brought before the City Council for a workshop early in 2023.

BACKGROUND:

Defining the Need
In recent years, the State of California has identified the s hortage of housing, particularly affordable housing, as a legislative priority. A housing shortage negatively impacts the State's economic competitiveness, contri butes to homelessness, results in long commutes, increases greenhouse gas emissions and air pollution, and contributes to poor public health. Over the past few years, State housing legislation has focu sed on housing production and affordability. In addition, State Housing Law mandates the Regi onal Housing Needs Assessment (RHNA) to be allocated to each jurisdiction during a specifi ed planning period, to be incorporated into the Housing Elements of t he General Plan to plan for the cu rrent and future housing needs of households at all income levels.

The City of Riverside’s 6
th Cycle (2021-2029) RHNA Allocation is listed below.

Income Level Units Percent
Very-low income (under 50% AMI) 4,861 26.3%
Low income (50-80% AMI) 3,064 16.6%
Moderate income (80-120% AMI) 3,139 17.0%
Above moderate income (120% + AMI) 7,394 40.1%
6th CYCLE TOTAL 18,458

The U.S. Department of Housing and Urban Development (HUD) defines affordable housing as housing where the household pays 30% or less of their gross income on total housing, including utilities. For example, low-income affordable housing frequently refers to housing that is priced so that it does not exceed this threshold for households who earn at or below 80% of the Area Median Income (AMI), which in Riverside is $69,920 annually (80% of the 2022 median $87,400) for a family of four.

It will take several resources and tools to address the affordable housing shortage and the City’s RHNA. Current resources and tools are listed in Attachment 6. A new tool that the City is considering to address the affordable housing shortage is inclusionary housing.

On September 15, 2020, the City Council and Housing Authority Board authorized the issuance of an RFP to explore the market impacts and make a programmatic recommendation regarding an inclusionary housing program. On November 12, 2020, the Cit y issued RFP 2054 seeking a consultant with a California economic development and housing background. On May 18, 2021, the City Council and Housing Authority approved a Professional Consultant Services Agreement with EPS for $73,000 to explore t he feasibility of implementing an inclusionary housing policy in the City of Riverside.

Stakeholder and Community Outreach
Following the September 27, 2021 HHC meeting, EPS engaged in several stakeholder and community outreach meetings to present the initial feasibility study finding and solicit feedback on Inclusionary Housing Workshop ● Page 3
the potential inclusionar y housing policy. These meetings are listed below, and the primary feedback received is listed in Attachment 7.

 Two stakeholder workshops in November 2021
o Workshop #1 included housing advocates and developers of affordable housing projects. Seven stakeholders were in attendance.
o Workshop #2 included developers of market-rate residential projects. 16 stakeholders attended the meeting.

 Presented to the Greater Riverside Chambe r of Commerce’s Economic Development Council in January 2022 and in June 2022 presented the HHC’s inclusionary housing recommendations.

 Community webinar held on January 12, 2022. Approximately 50 individuals signed on to the meeting.

City staff and EPS also provided the HHC with updates on the inclusionary housing feasibility and economic impacts study on March 22, 2021, September 27, 2021, February 28, 2022, and May 23, 2022.

During the HHC meeting on May 23, 2022, EPS identified prototype rental and for-sale market- rate products that the City might see developed in the future. EPS tested development feasibility of several scenarios of developi ng on-site affordable units, using a typical return assumption of

5.25% return on cost for rental projects and 15% profit margin on for-sale products. The HHC reviewed the draft inclusionary housing policy shown in Attachment 4 and directed staff to develop an ordinance to implement the policy for Pl anning Commission and City Council consideration (Attachment 8).

Planning Commission
On August 18, 2022, Planning staff presented amendments to Title 19 that included clean-up items and adding a new chapter for Inclusionary Housing under Planning Case PR-2022-001391.

The Planning Commission approved the zoning text amendment except for proposed Inclusionary Housing amendments, and instead reque sted that Staff return to c onduct a workshop prior to further Planning Commission consideration and recommendation.

On October 13, 2022, Planning staff conducted an Inclusionary Housing workshop with the Planning Commission. The public hearing item on Planning Case PR-2022-001391 was continued to November 10, 2022.

On November 10, 2022, Planning staff addressed Commissioner's questions from the previous meeting and requested that the public hearing for Planning Case PR-2022-001391 be continued off-calendar, with staff to retu rn to the Planning Commission for a final recommendation on the Inclusionary Housing ordinance after input is received from the full City Council.

DISCUSSION:

The workshop will cover the inclusionary housing feasibility analysis and findings in Attachment 10 and the following HHC inclusionary housing po licy recommendations that are detailed in Attachment 4, including but not limited to:

Inclusionary Housing Workshop ● Page 4

1. Inclusionary requirements (development ty pe, percentage of inclusionary housing units and income levels)

2. Exemptions from inclusionary housing policy

3. Affordability terms

4. Unit Characteristics

5. Off-site requirements

6. An in-lieu fee option

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 Cros-Cutting Threads as follows:

1. Community Trust – The initiative to explore an inclusionary policy merges best practices in policy development with intensive out reach 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 race s, backgrounds, and economic circumstances to live throughout Riverside, le ssening 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 stewar d 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 potentia lly creates a development tool to address changing needs and prepares for the fu ture through collaborative partnerships and adaptive processes in consultation with the public and development community.

5. Sustainability & Resiliency – By creating a balanced hous ing market, Riverside is ensuring a balanced economy that serves all inco me levels of city residents but does not sacrifice growth.

FISCAL IMPACT:

There is no fiscal impact associated with this report.

Prepared by: Michelle Davis, Housing Manager
Certified as to
availability of funds: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/City Treasurer
Approved by: Mike Futrell, City Manager
Approved as to form: Phaedra A. Norton, City Attorney Inclusionary Housing Workshop ● Page 5

Concurs with:

__________________________________
Erin Edwards, Chair
Housing and Homelessness Committee

Attachments:

1. September 27, 2021 HHC Staff Report

2. February 28, 2022 HHC Staff Report

3. Feasibility Analysis Presentation

4. May 23, 2022 HHC Inclusionary Housing Policy Recommendations

5. May 23, 2022 HHC Staff Report

6. Affordable Housing Resources and Tools

7. Stakeholder and Community Ou treach Meeting Primary Feedback

8. Inclusionary Housing Ordinance

9. Inclusionary Housing Policy and Ordinance FAQs

10. Feasibility Analysis Summary

11. Presentation

CITY OF
RIVER.SIDE
Housing and Homelessness
Committee Memorandum
City efArts &_Innovation
111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111 111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111 TO:

FROM:

HONORABLE COMMITTEE MEMBERS

OFFICE OF HOMELESS SOLUTIONS
DATE: SEPTEMBER 27, 2021
WARDS: ALL
SUBJECT: UPDATE ON THE FEASIBILITY AND ECONOMIC IMPACTS OF AN

INCLUSIONARY HOUSING PROGRAM FOR THE CITY OF RIVERSIDE -

DIRECT SUBMITTAL
ISSUE:

Receive an update on the feasibility and economic impacts of an lnclusionary Housing Program for the City of Riverside.

RECOMMENDATIONS:

That the Housing and Homelessness Committee:

1. Receive an update on the feasibility and economic impacts of an lnclusionary Housing Program for the City of Riverside; and

2. Provide direction to staff on how to proceed with the lnclusionary Housing Program.

BACKGROUND:

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 and Planning Systems, Inc., 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 lnclusionary 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. lnclusionary Housing Programs can include both for-sale and rental units and are often implemented through a jurisdiction's zoning code.

Attachment 1
1 Inclusionary Housing Update • Page 2
DISCUSSION:

The Housing Authority and Planning Division staff have been in discussions with Economic and Planning Systems, Inc., ( EPS) regarding preliminary data collection and data validation techniques leading to preliminary findings regarding the viability of an inclusionary housing policy.

EPS participated in a virtual project initiation kick-off meeting with City staff to discuss the overall context of the Project, the City' s specific objectives, and key opportunities and challenges for affordable housing development in Riverside. After initial discussions, EPS began its investigations by studying a targeted set of cities in California with approved inclusionary housing programs, including Temecula, Montclair, Highland, Irvine, and San Luis Obispo.

EPS has also assembled a tentative set of " static" pro forma financial models representing a range of rental and for -sale housing prototypes and is using these models to assess the development feasibility of these prototypes under a set of identified inclusionary policy alternatives. EPS then contacted market - rate developers Van Daele Homes, Pelican Communities, Ratkovich Properties, Realm Development, Steven Walker Communities, Diversified Pacific, RC Hobbs, Regional Properties, and Overland Development to verify housing and local market data and to get a developer' s perspective regarding inclusionary housing policies from firms building in the Riverside market. EPS also contacted the Habitat for Humanity Riverside and National Community Renaissance to understand the Riverside affordable housing market. Calls with developers were used to check assumptions and confirm development costs for the greater Riverside region utilized in its model.

Initial Findings:

As an initial step, EPS has investigated the inclusionary standards in other communities. Dozens of communities in California maintain inclusionary requirements for rental and/ or for -sale housing development, and EPS and City staff selected several that represent communities near, or that otherwise are similar to Riverside. As shown below, the selected communities have requirements that range from 3% to 15% affordable housing units for rental and for -sale developments. The income levels at which the units are required to be affordable also vary by community, ranging from very low- income units ( under 50% of Area Median Income) to moderate income units ( up to 120% of AMI).

Figure 1 Comparable Jurisdictions — Inclusionary standards for rental projects Rental Inclusionary Standards in Comparable Jurisdictions

16. 0% --

14. 0% _--

12. 0% _--

10. 0% _--

8. 0% _--
6O% _--
4O%
2 0% --
00%
Montclair Highland Irvine Irvine San Luis Obispo San Luis Obispo Option 41) ( Option 42) ( Option 41) ( Option p2)
Moderate 120% AMI Low SO%% AMI • Low 60% AMI Very Low 50% AMI Inclusionary Housing Update • Page 3
Figure 2 Comparable Jurisdictions — Inclusionary standards for for -sale projects For Sale Inclusionary Standards in Comparable Jurisdictions 16%
14%
12%
10%
6%
4%
2%
0% I 1
1 Fontana Calimesa Montclair Highland Irvine Irvine San Luis Obispo San Luis Obispo Option # 1) ( Option # 2) ( Option # 1) ( Option # 2)
Moderate 120% AMI • Low 80% AMI • Low 60% AMI Very Low 50% AMI Very Low 50% AMI Note: Fontana and Calimesa do not have inclusionary requirements for rental residential projects.

As illustrated, there is significant variation in inclusionary standards at a basic level — how much and at what income levels — and there is also a variation among jurisdictions regarding the sizes of projects subject to the requirements, whether fees can be paid in lieu of providing units, and other aspects of the programs. It is also true that many jurisdictions do not have inclusionary standards at all, and either rely on other programs to produce affordable housing or do not prioritize such housing other than as required by the State of California.

As a second step, EPS has explored the economic implications of requiring inclusionary standards for new housing construction in Riverside. Inclusionary ordinances require developers to provide a certain number of units at prices below the maximums that the market could support, but the cost to construct the inclusionary units on- site tends to be the same as the market -rate units. Thus, inclusionary requirements lower the development' s total revenue potential relative to a fully market -rate project and can limit the profit margin or other financial returns to the developer. If those financial returns fall below rates required to attract investment and secure loans to construct the project, the project is no longer feasible, and the developers and investors will elect to place their money and efforts into other projects or investment vehicles.

EPS worked with City staff to identify five types of housing developments that might be foreseen in Riverside. These include for -sale single- family detached homes ( 10 units per acre) and attached townhomes ( 15 units per acre), as well as rental apartments at different densities reflecting their locations in the Downtown ( 100 units per acre), transit - adjacent areas ( 60 units per acre), or other neighborhoods of the City ( 30 units per acre). For each housing prototype, EPS conducted research including developer interviews to estimate the costs of development land acquisition, construction labor and materials, and indirect costs such as design, entitlement, marketing, etc.) and the market - rate values and revenues that could be achieved. While Inclusionary Housing Update • Page 4
recognizing that any given project or property will have certain unique attributes — and that the COVID- 19 pandemic has dramatically affected the availability and costs of both construction labor and materials — EPS has estimated the typical construction costs and revenues for each prototype under a more stabilized market condition. EPS then compared those costs and revenues without any inclusionary standards to determine whether they met common investment thresholds for feasibility. For the for -sale housing, the threshold was a 15% profit margin ( values exceed costs by at least 15 percent). For rental properties, the threshold was a " return on cost" of 5. 25%, meaning that the expected net operating income of the project ( total rents received less operating expenses) would equal at least 5. 25% of the project' s total development costs. EPS based these investment threshold assumptions on their experience with comparable transactions, recent market data, and input from regionally active developers as part of the research process.

As shown below, EPS estimates the new market -rate, for -sale housing development in Riverside can achieve returns above the minimum feasibility thresholds. This result allows the possibility that the City might impose at least some level of inclusionary standards on for -sale housing without rendering the project infeasible. As examples, EPS has shown inclusionary scenarios below that can maintain the minimum return thresholds, even as some of the units must be sold for less than they cost to develop. The profits generated by the market -rate units can offset and thus effectively subsidize the deficits specific to the inclusionary units.

Figure 3 Feasibility of Inclusionary Scenarios for Single Family For -Sale Products Threshold Return No Inclusionary 10% Mode rate 2% Lova
Inclusionary Housing Update • Page 5
Figure 4 Feasibility of Inclusionary Scenarios for Townhome For -Sale Products 25%
20%
15%
10%
5%
Threshold Return No Inclusionary 15% Low 12% Very Low
For rental housing, EPS estimates that new market -rate rental housing development can receive at or above the minimum feasibility thresholds. Returns on denser development types in the Downtown and transit - adjacent areas show a return on cost just around the 5. 25% threshold, while mid -density types in other parts of the City show a higher return on cost. This is primarily attributable to higher costs associated with developing these products, which are not fully offset by achievable rents. Given this, it may be possible to impose an inclusionary requirement on mid - density multifamily projects without rendering them infeasible, but it is unlikely that higher density infill projects will be able to support similar requirements. Inclusionary scenarios that would be feasible for mid -density projects are shown in the following chart.

Figure 5 Feasibility of Inclusionary Scenarios for Multifamily Rental Products

6. 00%

5. 00%

4. 00%

3. 00%

2. 00%

1. 00%

0. 00%
Threshold No Inclusionary 15% Low
Mid - Density • TOD • Downtown
10% Very Low
As a next step, staff and EPS are seeking direction as to whether the City would like to continue to explore an inclusionary housing program for new development. If so directed, staff and EPS will continue outreach to community and industry representatives, test the feasibility of additional inclusionary alternatives, and prepare recommendations for program standards with community Inclusionary Housing Update • Page 6
participation to begin in late October of this year.

STRATEGIC PLAN ALIGNMENT:

This item contributes to Riverside' s Envision 2025 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. It also supports Action 2. 1. 4, Prepare creative land use regulations that include Adaptive Reuse Ordinance, Inclusionary Zoning, Density Bonus Ordinance, and Infill Ordinance to create incentives for housing development.

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 impact to the general fund with this report.

Prepared by: Michelle Davis, Housing Authority Manager
Certified as to
availability of funds: Edward Enriquez, Chief Financial Officer/ City Treasurer Approved by: Kris Martinez, Interim Assistant City Manager Approved as to form: Phaedra A. Norton, City Attorney
City °JArts &Innovation
Housing and Homelessness
Committee Memorandum

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COMMITTEE MEMBERS
DATE: FEBRUARY 28, 2022
FROM: OFFICE OF HOMELESS SOLUTIONS WARD: ALL
SUBJECT: UPDATE ON INCLUSIONARY HOUSING PROGRAM STUDY FOR THE CITY OF

RIVERSIDE
ISSUE:

Receive a presentation on updates related to the City of Riverside Inclusionary Housing Program study and preliminary recommendations for inclusionary requirements.

RECOMMENDATION:

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 inclusionary housing program requirements; and

2. Provide staff with direction on how to proceed with the Inclusionary Housing Program Study.

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 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 Attachment 2
1 1
i
Update on Inclusionary Housing Program Study for the City of Riverside • Page 2 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 on 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.

DISCUSSION:

Survey of Comparable Jurisdictions
Inclusionary housing requirements are common throughout California, with over 170 jurisdictions imposing such requirements on new residential construction. Communities have considerable flexibility regarding the components of their inclusionary programs, in terms of what percentages of units must be affordable, the income levels required, whether they apply to both rental and for - sale housing, what sizes and types of projects may be exempt, whether they allow fees in lieu of providing units, and other components. A small sample of selected jurisdictions with geographic or economic similarities to Riverside indicates that communities have adopted a wide range of inclusionary programs, as shown below:

Figure 1: Selected Sample of Inclusionary Standards for For -Sale Housing 16%
14%
12%
10%
8%
6%
4%
2%
0%
1 I
I
I
I
Fontana Calimesa Montclair Highland Irvine Irvine San Luis San Luis Option# 1) ( Option# 2) Obispo Obispo
Option # 1) ( Option # 2)
Very Low 50% AMI _.. Low 60% AMI Low 80% AMI • Moderate 120% AMI Note: Fontana and Calimeso do not have inclusionary requirements for rental residential projects.

Figure 2: Selected Sample of Inclusionary Standards for Rental Housing Update on Inclusionary Housing Program Study for the City of Riverside • Page 3 16%
14%
12%
10%
8%
6%
4%
2%
0%
1 1
1 Montclair Highland Irvine Irvine San Luis Obispo San Luis Obispo Option 41) ( Option 42) ( Option441) ( Option 42)
Very Low 50% AMI Low 60% AMI Low 80% AMI • Moderate 120% AMI As shown in Figures 1 and 2, it is common for communities to require as much as 15 percent inclusionary units and with a mix of income levels. However, some communities require lower percentages of units and at a single income level. These findings inform the preliminary recommendations for Riverside' s inclusionary program, discussed below.

More data regarding other communities' inclusionary standards can be found at the following website: California Inclusionary Housing Programs Searchable Database ( arcgis. com) Stakeholder and Community Outreach:

Following the September 28, 2021, Housing and Homelessness Committee meeting, EPS engaged in several stakeholder and community outreach meetings to present the initial feasibility study findings and solicit feedback on the potential inclusionary program. These meetings are summarized below:

EPS hosted two virtual stakeholder meetings in November 2021. The first stakeholder meeting took place on November 5, 2021, and included seven participants involved in housing advocacy work and/ or development of affordable residential properties. Primary feedback from this workshop included:

Importance of including affordable units in market -rate developments, to avoid clustering of affordable units in existing low- income areas of City.

Some but not unanimous support for consideration of in -lieu fee option, as it can result in more affordable units in the long -run through funding leverage.

Program should include option for land donation and/ or collaboration with nonprofit builders for separate buildings to meet inclusionary requirement — would be relevant for larger projects.

Encouraging City to explore other tools for developing permanent/ long- term affordable housing, including co-ops and community land trusts, and other funding sources such as transient occupancy tax ( TOT).

Update on Inclusionary Housing Program Study for the City of Riverside • Page 4 The second stakeholder meeting took place on November 16, 2021, and included 16 participants involved in developing and operating market - rate residential projects. Representatives from the Riverside Chamber of Commerce and Building Industry Association attended this workshop.

Primary feedback from this workshop included:

Desire for flexibility from City in negotiating on a project -by -project basis, to reflect that every project has unique cost factors.

Concern that feasibility models may underestimate development costs, in which case financial returns are overestimated and projects may be less able to absorb the costs of inclusionary requirements.

Interest in having incentives that will reduce costs elsewhere in a project, although higher density allowances do not always improve project feasibility because construction costs can increase.

Combined with other City policies that are adding costs to development, such as VMT reduction and electrification policies, the addition of inclusionary requirements can push many projects into infeasibility.

Better option to get affordable units is to support the building of 100% affordable projects on City -owned land; alternately, City should share in cost of inclusionary requirements somehow.

On January 12, 2022, EPS and City staff hosted a virtual community webinar on the Inclusionary Housing Program Study. Approximately 50 individuals signed on to the meeting. EPS provided a presentation on the Study, and EPS and City staff took written and oral questions and comments from attendees. Primary feedback from this meeting included:

Overall support for an inclusionary housing policy.

Preference to require units on- site rather than allow in -lieu fee; fee should be higher than cost of providing on-site units to discourage the fee option.

Questions about other means of encouraging development of affordable units, such as density bonuses (which the City and State do have).

Stated need for provision of affordable housing that serves special needs population.

On January 25, 2022, EPS staff provided a consolidated version of the community webinar at a meeting of the Riverside Chamber of Commerce' s Economic Development Council.

Review of Feasibility Findings
Since presenting to the Housing and Homelessness Committee on September 28, 2021, EPS made some refinements and additions to its feasibility analysis. One refinement includes an adjustment in maximum rents and sale prices affordable to very -low, low-, and moderate - income households. While the State defines the upper limit of these affordability levels at 50%, 80%, and 120% of Area Median Income, respectively, EPS has found that it is a best practice to set the upper limit for low- and moderate - income households at 70% and 110% of Area Median Income, respectively. This approach, which is used by many California jurisdictions, allows more households to qualify for and afford the inclusionary units, but does lower the revenue from those units and thus affects feasibility. Table 1 shown in Attachment 1 summarizes the maximum incomes and associated maximum rents and sale prices used in the feasibility analysis.

One addition to the analysis is the preliminary calculation of affordable housing in -lieu fee levels for various inclusionary requirements. The fee levels reflect the financial subsidy needed to build the affordable units that the development is not providing on- site. Payment of such a fee can be Update on Inclusionary Housing Program Study for the City of Riverside • Page 5 offered as an alternative option to providing on- site units, although some cities do limit the option to specific conditions ( e.g., to cover fractional units required, or only for projects below a certain size). The City would collect fee revenues in a dedicated fund to utilize in support of producing and preserving affordable housing units in Riverside. Examples of potential uses include providing local matching funds to support 100% affordable projects, purchasing land for affordable housing development, or purchasing existing units and requiring/ extending affordability.

EPS applied a range of inclusionary scenarios, including payment of the in -lieu fee, to the five housing prototypes identified in the preliminary feasibility analysis. These prototypes include for - sale single- family detached homes ( 10 units per acre) and attached townhomes ( 15 units per acre), as well as rental apartments at different densities reflecting their locations in the Downtown 100 units per acre), Downtown- and transit - adjacent areas ( 60 units per acre), or other neighborhoods of the City ( 30 units per acre). EPS updated its feasibility analysis to compare development costs and revenues under the inclusionary requirements to determine whether they met common investment thresholds for feasibility. For the for -sale housing, the feasibility threshold is a 15% profit margin ( values exceed costs by at least 15 percent). For rental properties, the feasibility threshold is a " return on cost" of 5. 25%, meaning that the expected net operating income of the project ( total rents received less operating expenses) would equal at least 5.25% of the project' s total development costs.

For rental housing, EPS tested the following inclusionary requirement scenarios: 1) 15% of units affordable to low- income households; 2) 10% of units affordable to low- income households; and 3) 10% of units affordable to very - low income households. EPS also estimated that if the inclusionary requirement were for 10% of units to be affordable to low- income households, the associated in -lieu fee needed to support the development of the required units elsewhere would be approximately $ 13, 000 per market - rate unit built. EPS found that rental projects developed at 30 units per acre outside of the Downtown and nearby areas could feasibly include affordable units in all of the scenarios. However, rental projects developed at 60 or 100 units per acre in and around Downtown would have higher development costs per unit and could not feasibly include affordable units in any of the scenarios. Therefore, it would be feasible for these higher -density projects to pay the estimated in -lieu fee.

For for -sale attached townhomes, EPS tested the following inclusionary scenarios: 1) 10% of units affordable to low- income households; and 2) 5% of units affordable to very -low income households. EPS also estimated that if the inclusionary requirement were for 10% of units to be affordable to low- income households, the associated in - lieu fee needed to support the development of the required units elsewhere would be approximately $ 17, 000 per market - rate unit built. EPS found that for -sale attached townhome projects are forecast to have strong profit margins and could feasibly provide affordable units under both inclusionary scenarios, and that paying the estimated in -lieu fee rather than providing on-site units would be feasible for such projects as well.

For for -sale detached single- family homes, EPS tested the following inclusionary requirements:
1) 5% of units affordable to moderate income households; and 2) 2% of units affordable to low- income households. EPS also estimated that if the inclusionary requirement were for 5% of units to be affordable to moderate - income households, the associated in -lieu fee needed to support the development of the required units elsewhere would be approximately $ 7, 000 per market - rate unit built. EPS found that under current cost and value expectations, for -sale detached single- family developments are forecast to have marginally feasible profit margins even if they are all market - rate units and that such projects would face feasibility challenges whether they provide affordable units on-site under either inclusionary scenario or pay the estimated in -lieu fee.

Update on Inclusionary Housing Program Study for the City of Riverside • Page 6 Preliminary Recommendations
Given the findings of the feasibility analysis and the feedback received from stakeholders and community members, EPS has compiled a preliminary set of recommendations for an Inclusionary Housing Program in Riverside for the Committee' s consideration:
1) Inclusionary requirements
Multifamily – 10% of units affordable to low- income households ( 70% AMI)* Townhome - 10% of units affordable to low- income households ( 70% AMI)* Single- family – 5% of units affordable to moderate -income households ( 110% AMI) These requirements would automatically qualify projects for the use of State density bonus 2) Develop an in -lieu fee to align with the above requirements. Allowance for payment of fee should be based on City priorities ( e.g., encouraging on- site units/ mixed- income properties vs. maximize local support for affordable projects).
3) Consider a phased - in approach for requirements to allow markets to adjust and a set timeline for revisiting requirements in light of evolving market conditions.

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. It also supports Action 2. 1. 4, Prepare creative land use regulations that include Adaptive Reuse Ordinance, Inclusionary Zoning, Density Bonus Ordinance, and Infill Ordinance to create incentives for housing development.

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

3. Fiscal Responsibility — By using 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.

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.

Update on Inclusionary Housing Program Study for the City of Riverside • Page 7 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, Chief Financial Officer/ Treasurer Approved by: Lea Deesing, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Attachments:

1. Table 1: Affordability Standards for the City of Riverside

2. Presentation
Attachment 1
Table 1: Affordability Standards for City of Riverside
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CITY OF RIVERSIDE

INCLUSIONARY HOUSING

PROG RAM STUDY
Housing and Homelessness
Committee Meeting Update
February 28, 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
Study ProcessProcessTo - Date
Review of Inclusionary Housing Policies in Other Cities Review of Feasibility Analysis
Overview of Stakeholder and Community Outreach To - Date Preliminary Recommendations for City Program
Discussion
Economic & Planning Systems EPS PPT Presentation 1
1 1

ISTUDY PROCESS TO - DATE
2021May pmt
EPSengaged by City
June - Au • ust 202
EPSpreliminary technical analysis
Septembe
Presentation of preliminary findings to Housing and Homelessness Committee
November 2021
Meetings with targeted stakeholder groups
Januar 202
Community town hall presentation
Economic & Planning Systems EPS PPT Presentation 2
2 AFFORDABLE HOUSING CONTEXT FOR RIVERSIDE
Riverside Affordable Housing Standards for 2021
Multifamily Rental Units For - Sale Townhome Units Single Family For -Sale Units Affordability Category 6th Cycle RHNA
Allocation
2021 Max Income
3 person Maximum Rent
household)[ ( 2 -bedroom unit) 2
2021 Max Income
4 person Maximum Sale Price
household)[ ( 3 -bedroomhome)3'4
2021 Max Income
5 person Maximum Sale Price
household)[ ( 4 -bedroom home)a
Extremely Low Income ( ELI)- 30% AMI
Very Low Income ( VLI) - 50% AMI
Low Income ( LI) - 70% AMI
Moderate Income ( MOD) - 110% AMI
Above Moderate Income - > 120% AMI
Typical Market Rates [ 5]
2431
2, 430
2064
3, 139
7, 394
21, 960 $ 549
35, 550 $ 889
49,802 $ 1, 245
76, 725 $ 2, 238

N/ A N/ A
2, 571
6] [ 6]
39, 500 $ 114,440
55, 335 $ 202, 498
85, 250 $ 423, 481

N/ A N/ A
400,000
6] [ 6]
42,700 $ 147, 845
59,762 $ 239, 779
92,070 $ 478, 887

N/ A N/ A
625,000
1] Income levelsare basedoff the median household income for RiversideCounty, as reported by CAHCD. 2] Maximum rent for each income level 4 based on 30% of maximum income for ELI, VLI, and LI; and 35% of maximum income for MOD. 3] Maximum sale price for each income level assumes mortgage payment equal to 30% of maximum monthly income for ELI, VLI, and LI, and 35% of maximum monthly income for MOD ( minus taxes and insurance), on a 30 -year mortgage with a 3. 5% annual interest rate and 10% down payment.
4] The maximum sale price for four -person households at moderate income is higher than the estimated market -rate price for townhome products in Riverside. Therefore, EPS's analysis does not include moderate -income inclusionary requirements for townhomes.
5] Basedon EPSmarket research. Estimated rates are for 2 -bedroom, 850 sq. ft. rental unit; 3 -bedroom, 1,500 sq. ft. for -saletownhome; and4 -bedroom, 2,500 sq. ft. singlefamily home. 6] Inclusionaryprogramsdo not typically include ELIrequirementsfor -salehousing.

Sources: State of CANCO; City of Riverside; COStar; Zillow; EPS Economic & Planning Systems EPS PPT Presentation 1 3
3 2

IINCLUSIONARY HOUSING POLICIES IN CALIFORNIA
Riverside
Economic & Planning Systems
e
gib
Riverside
Over 1 70 cities and counties in California
have inclusionary housing policies
Source: Grounded Solutions Network
EPS PPT Presentation 4
4 IIHP IN COMPARABLE JURISDICTIONS - FOR SALE
1 Fontana Calimesa Montclair Highland Irvine Irvine San Luis San Luis Option 41) ( Option # 2) Obispo Obispo
Option # 1) { Option # 2}
Very Low 5096AM • Low 6095 AMI • Low MOM] • Moderate 120% AMI Note: Fontana and Cal (mesa do not haw Induslonaryrequirements for rental residential projects.

Economic & Planning Systems EPS PPT Presentation 5
5 3

IIHP IN COMPARABLE JURISDICTIONS - RENTAL
16%
14%
12%
10%
8%
6%
4%
2%
0%
Economic & Planning Systems
1 1 1
Montclair Highland Irvine Irvine San Luis Obispo San Luis Obispo Option # 1) ( Option# 2) { Option f41) ( Option# 2)
Very Low 50%AMI • Low 60% AMI • Low 80% AMI • Moderate 120% AMI EPS PPT Presentation 6
6 1

FEASIBILITY ANALYSIS
Developed prototype rental and for - sale market - rate products that the City might see developed in the future.

Tested feasibility of several scenarios of developing on- site affordable units, using typical return metrics

5. 25% return on cost for rental projects
15X, profit margin on for - sale projects
Also estimated an in -lieu fee and assessed the feasibility impacts of paying fee as compared to building on- site units
Fee calculated as subsidy needed to support development of affordable units off- site ( Unit value at affordable levels - Cost of building unit) EPScalculated fees for select inclusionary requirements - if City opts to include fee option, calculation will be updated to reflect preferred requirement
Economic & Planning Systems EPS PPT Presentation 7
7 4

PROTOTYPE PRODUCTS
Downtown Multifamily
100 units/ acre)
Economic & Planning Systems
Infill Multifamily
60 units/ acre)
Mid - Density Multifamily
30 units/ acre)
Single Family Homes
N10 units/ acre)
EPS PPT Presentation 8
8 INCLUSIONARY 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%507%507% 5.39%5.21%5.22%
Return
Threshold:

5.25% 5.43%5.33%5.34% 5.26%5.11%5.12%
II. iI I I I

II II I
II
11 11
I
No Inclusionary 15% Low 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 9
9 5

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%

15. 6%

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
EPS PPT Presentation 10
10 1

INCLUSIONARY SCENARIOS - FOR SALE SINGLE FAMILY
Scenarios for single family detached homes include:
5% of units for moderate - income households
2% of units for very low- income households
In - lieu fee on 5% moderate - income requirement ($ 7, 000 per market rate unit)

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 11
11 6
1 SUMMARY OF FEASIBILITY RESULTS
For -sale single family home products are limited in feasibly providing inclusionary units
For - sale townhomes products appear able to support inclusionary requirements, but are a less common product
Multifamily rental products at - 30 units/ acre appear to feasibly support inclusionary requirements, and are a common product Higher - density multifamily rental products in and near Downtown tend to have higher costs, and providing affordable units is less feasible
Payment of in - lieu fee yields a higher return than providing on- site units
Economic & Planning Systems EPS PPT Presentation 12
12 1

STAKEHOLDER FEEDBACK
EPS hosted two stakeholder workshops in November 2021, and presented to the Riverside Chamber of Commerce' s Economic Development Council in January 2022
Workshop # 1 included housing advocates and developers of affordable housing projects. Seven stakeholders attended the meeting, and provided following primary feedback:

Importance of including affordable units in market - rate developments, to avoid clustering of affordable units in existing low- income areas of City Some but not unanimous support for consideration of in - lieu fee option, as it can result in more affordable units in the long - run through funding leverage Program should include option for land donation and/ or collaboration with nonprofit builders for separate buildings to meet inclusionary requirement - would be relevant for larger projects
Encouraging City to explore other tools for developing permanent/ long- term affordable housing, including co- ops and community land trusts, and other funding sources such as transient occupancy tax ( TOT)
Economic & Planning Systems EPS PPT Presentation I 13
13 7
1 STAKEHOLDER FEEDBACK
Workshop # 2 included developers of market - rate residential projects. Sixteen stakeholders attended the meeting and provided following primary feedback:

Desire for flexibility from City in negotiating on a project - by -project basis, to reflect that every project has unique cost factors
Concern that feasibility models may underestimate development costs, in which case financial returns are overestimated and projects may be less able to absorb the costs of inclusionary requirements
Interest in having incentives that will reduce costs elsewhere in a project, although higher density allowances do not always improve project feasibility because construction costs can increase
Combined with other City policies that are adding costs to development, such as VMT reduction and electrification policies, addition of inclusionary requirements can push a lot of projects into infeasibility
Better option to get affordable units is to support building of 100% affordable projects on City -owned land; alternately, City should share in cost of inclusionary requirements somehow
Economic & Planning Systems EPS PPT Presentation 14
14 1

COMMUNITY FEEDBACK
EPSand City hosted a community webinar on January 12, 2022 Approximately 50 individuals signed on to meeting
Primary feedback included:

Overall support for an inclusionary housing policy
Preference to require units on- site rather than allow in - lieu fee; fee should be higher than cost of providing on- site units to discourage the fee option Questions about other means of encouraging development of affordable units, such as density bonuses ( which the City and State do have)
Stated need for provision of affordable housing that serves special needs population Economic & Planning Systems EPS PPT Presentation I 1 5
15 8

IELEMENTS OF AN INCLUSIONARY HOUSING POLICY
Cities have wide latitude in structuring inclusionary policy - Cities have wide latitude in structuring inclusionary policy - there is no " one size fits all"
Inclusionary Requirement: Proportion of new units that must be affordable
Affordability Levels: Income levels that are served by affordable units Included/ Exempted Developments: Can include a minimum project size or particular project types
Requirements for rental vs. for - sale units
District - based Requirements
In - Lieu Fee Option
Economic & Planning Systems EPS PPT Presentation I 16
16 1

PRELIMINARY RECOMMENDATIONS
Given EPS's research and analysis, and the stakeholder and community feedback, we would make the following preliminary recommendations to the City in developing an inclusionary housing program:

1. Inclusionary requirements
a. Multifamily - 10% of units affordable to low- income households ( 70% AMI)* b. Townhome - 10% of units affordable to low- income households ( 70% AMI) c. Single family - 5% of units affordable to moderate - income households ( 110% AMI) These requirements would automatically qualify projects for use of State density bonus

2. Develop an in - lieu fee to align with the above requirements y Allowances for payment of fee should be based on City priorities ( e.g. encouraging on- site units/ mixed- income properties vs. maximize local support for affordable projects)

3. Consider a phased - in approach for requirements to allow markets to adjust, and set timeline for revisiting requirements in light of new market conditions Economic & Planning Systems EPS PPT Presentation I 17
17 9
1 Questions/ Discussion
Economic & Planning Systems EPS PPT Presentation 18
18 1

TOPICS FOR DISCUSSION / FEEDBACK
Questions/ concerns/ feedback regarding recommended
inclusionary requirements
Changes to requirements? Exemptions for any uses?
City questions/ preferences regarding use of in - lieu fee What are the priorities?
Timeline for program implementation
Economic & Planning Systems EPS PPT Presentation I 19
19 10
1 COMMITTEE RECOMMENDATIONS
Receive an update on the Inclusionary Housing Program Study for the City of Riverside, including preliminary recommendations on inclusionary housing program requirements; and
Provide staff with direction on how to proceed with the Inclusionary Housing Program Study.

Economic & Planning Systems EPS PPT Presentation I 20
20 11
Housing and Homelessness Committee - Art Pick Council ChamberNirtual Meeting Time: February 28, 2022 at 3:30 p.m.
eComments Report
Meetings Meeting Agenda Comments Support Oppose Neutral Time Items
Housing and Homelessness Committee - 02- 28- 22 10 5 3 0 1 Art Pick Council ChamberNirtual 15: 30
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Support( 66%)
Oppose{ 0% 1
Neutra1126%y
No Response( 26%)
Housing and Homelessness Committee - Art Pick Council Chamber/ Virtual 02- 28-22 15: 30
Agenda Name Comments Support Oppose Neutral

1. To comment on any matters within the jurisdiction of the Committee, 1 0 0 1 you are invited to participate in person or call at ( 669) 900- 6833 and enter Meeting ID: 926 9699 1265. Press * 9 to be placed in the queue to speak.

Individuals in the queue will be prompted to unmute by pressing * 6 when you are ready to speak.

To participate via ZOOM, use the following link:
https:// zoom. us/j/ 92696991265, select the ' raise hand" function to request to speak. An on- screen message will prompt you to " unmute" and speak - Individual audience participation is limited to 3 minutes.

2. Inclusionary Housing Program Study update ( All Wards) ( 10 -minute presentation)
Julie Cooper, Economic & Planning Systems, Inc.
4 3 0 0
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Agenda Item: eComments for 2. Inclusionary Housing Program Study update ( All Wards) ( 10 -minute presentation) Julie Cooper, Economic & Planning Systems, Inc.

Overall Sentiment
Support( 75°. 6)
Oppose{ 044,)
Neutra114Hy
No Response( 25%)
vonya queries
Location: 92506, Riverside
Submitted At: 1:29pm 02- 28- 22
I am in support of the city continuing to move forward with a plan for an inclusionary housing policy, preferably with some additional adjustments that would ensure we are moving towards housing opportunities for those in our community faced with additional housing barriers. With market -rate units remaining unaffordable to over 60% of our residents according to average rent and median income data, our community residents need as much access to affordable housing as possible. Our ability to actually address the current housing crisis and overall homelessness depends on it. Even with housing vouchers people are unable to get housing because of the voucher amounts, the desired rental requirements, and the barriers related to conviction histories ( no matter how old), crime free housing ordinances, eviction histories, or income thresholds that many of our people are unable to meet. Thank you for your service!
Dan Hoxworth
Location: 92506, Riverside
Submitted At: 1: 08pm 02- 28- 22
Dear Riverside City Housing and Homelessness committee:

This is Dan Hoxworth, Riverside Ward 3 resident. I am submitting my public comments on Agenda item # 2 Inclusionary housing. My comments on each of the Inclusionary staff/ consultants 3 recommendations follow.

Staff Recommendation # 1) Inclusionary requirements
Multifamily — 10% of units affordable to low- income households ( 70% AMI)* Townhome - 10% of units affordable to low- income households ( 70% AMI)* Single- family — 5% of units affordable to moderate -income households ( 110% AMI) Comment:

Given the size of the affordable housing crisis we face, the percentage for multi -family, townhome, and single family affordable units percentage is very low. It needs to be much higher to encourage the development of a few affordable housing units.

Staff recommendation # 2) In - lieu fees
Develop an in -lieu fee to align with the above requirements. Allowance for payment of fee should be based on City priorities ( e. g., encouraging on-site units/ mixed- income properties vs. maximize local support for affordable projects).

Comment:

Increase the in -lieu fee to encourage development of affordable units. The fee should be high enough to create a strong disincentive to developers creating housing without affordable units.

The City must develop more revenue solutions for the housing trust. First, any in -lieu fees that are paid should go to the housing trust. In addition, the City should look for other revenue sources to bolster the housing trust to raise funds for affordable housing projects.

Staff Recommendation 3) Phased In Requirements
Consider a phased -in approach for requirements to allow markets to adjust and a set timeline for revisiting requirements in light of evolving market conditions.

Comment: Do not phase in the requirements. We have an affordable housing crisis so the recommendations must be implemented immediately.

Thank you for your time and consideration.

With gratitude,
Dan H. Hoxworth
Riverside Ward 3 Resident
Maribel Nunez
Location: 92501, Riverside
Submitted At: 11: 34am 02- 28- 22
1) Inclusionary requirements
Multifamily — 10% of units affordable to low- income households ( 70% AMI)* Townhome - 10% of units affordable to low- income households ( 70% AMI)* Single- family — 5% of units affordable to moderate -income households ( 110% AMI) The multi -family, townhome, and single family affordable units % are very low and that will encourage the development of a few affordable housing units. For example, if 18,000 RHNA and they are all apartments and townhomes, would account only 1,800 affordable units. In 6th Riverside' s housing element, out of Riverside' s 18,000 total RHNA, you need to zone for 7,907 total for Very Low Income/ Low Income Area Median Income # of units)
2) Develop an in -lieu fee to align with the above requirements. Allowance for payment of fee should be based on City priorities ( e. g., encouraging on-site units/ mixed- income properties vs. maximize local support for affordable projects).

Our comments/ recommendation: if a developer doesn' t want to build affordable housing, make the in -lieu fee high like 25% to encourage the development of affordable units.

Also adding that the city develop housing trust and advocate for more revenue solutions ( cannabis tax, tot tax and etc) Any in lieu fees that are paid should go to the housing trust. In lieu fees won' t be enough to help raise funds for off site affordable housing projects.
3) Consider a phased -in approach for requirements to allow markets to adjust and a set timeline for revisiting requirements in light of evolving market conditions.

Our comments/ recommendations: No phase in approach. We need affordable housing now.

Damien OFarrell
Location: Riverside
Submitted At: 11: 30am 02- 28- 22
I am in support of the city continuing to move forward a plan for an inclusionary housing policy, preferably with some adjustments. With market rate units remaining unaffordable to over 60% of our residents according to average rent and median income data, our community residents need as much access to housing that is affordable as possible. Our future depends on it. Additionally, as a result of our housing crisis even efforts that are proven to provide housing stability ( such as the voucher program) are faltering. Case in point: according to the data I've been provided by HUD, only one household has been leased up out of nearly 400 available vouchers since the beginning of the emergency voucher program for those in homeless situations in Riverside County in 2021. Only one! And this is with vouchers that guarantee full fair market rents paid on time every month! The lack of available units is the main cause of this. All this said, I request that you also ask the staff and consultants to try to make the following items work and include them in their suggestions for the policy: 1) Increase the percentage levels of the requirements by identifying additional sources of possible subsidies to make this work for the developers ( such as taxes received from cannabis operations if that ends up moving forward), 2) Ensure that the In Lieu fee program is design in such a way that it actually produces the revenue needed for the city to build the other units; and/ or 3) include a requirement that a certain percentage of units ( in addition to the affordable requirement) be reserved for exclusive rental to voucher holders and/ or participants of other subsidized rental programs ( such as rapid rehousing) - doing so could produce a win- win situation in which voucher holders and program participants can find housing while landlords receive full fair market rents. I am happy to provide more information on everything that I have mentioned in this comment. Thank you for your service! r.

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1 Economic & Planning Systems, Inc.

The Economics of Land Use
949 South Hope Street, Suite 103  Los Angeles, CA 90015 213.489.3838  www.epsys.com
Economic & Planning Systems, Inc.

The Economics of Land Use

CITY OF RIVERSIDE

INCLUSIONARY HOUSING

PROGRAM STUDY
Housing and Homelessness
Committee Meeting Update
February 28, 2022
Economic & Planning Systems EPS PPT Presentation | 1
AGENDA
 Study Process To-Date
 Review of Inclusionary Housing Policies in Other Cities  Review of Feasibility Analysis
 Overview of Stakeholder and Community Outreach To-Date  Preliminary Recommendations for City Program
 Discussion
0 1
Attachment 3
2 Economic & Planning Systems EPS PPT Presentation | 2

STUDY PROCESS TO-DATE
• EPS engaged by City
May 2021
• EPS preliminary technical analysis
June-August 2021
• Presentation of preliminary findings to Housing and Homelessness Committee
September 2021
• Meetings with targeted stakeholder groups
November 2021
• Community town hall presentation
January 2022
Economic & Planning Systems EPS PPT Presentation | 3

AFFORDABLE HOUSING CONTEXT FOR RIVERSIDE
Riverside Affordable Housing Standards for 2021
Affordability Category 6th Cycle RHNA
Allocation
2021 Max Income
(3 person
household)1
Maximum Rent
(2‐bedroom unit)2
2021 Max Income
(4 person
household)1
Maximum Sale Price
(3‐bedroom home)3, 4
2021 Max Income
(5 person
household)1
Maximum Sale Price
(4‐bedroom home)3
Extremely Low Income (ELI) ‐ 30% AMI 2,431 $21,960 $549 [6] [6] [6] [6] Very Low Income (VLI) ‐ 50% AMI 2,430 $35,550 $889 $39,500 $114,440 $42,700 $147,845 Low Income (LI) ‐ 70% AMI 2,064 $49,802 $1,245 $55,335 $202,498 $59,762 $239,779 Moderate Income (MOD) ‐ 110% AMI 3,139 $76,725 $2,238 $85,250 $423,481 $92,070 $478,887 Above Moderate Income ‐ >120% AMI 7,394 N/A N/A N/A N/A N/A N/A Typical Market Rates [5] $2,571 $400,000 $625,000
[1] Income levels are based off the median household income for Riverside County, as reported by CA HCD. [2] Maximum rent for each income level is based on 30% of maximum income for ELI, VLI, and LI; and 35% of maximum income for MOD. [5] Based on EPS market research. Estimated rates ar e for 2‐bedroom, 850 sq. ft. rental unit; 3‐bedroom, 1,500 sq. ft. for‐sale townhome; and 4‐bedroom, 2,500 sq. ft. single family home. [6] Inclusionary programs do not typically include ELI requirements for‐sale housing.

Sources: State of CA HCD; City of Riverside; CoStar; Zillow; EPS Multifamily Rental Units For‐Sale Townhome Units Single Family For‐Sale Units [3] Maximum sale price for each income level assumes mortgage payment equal to 30% of maximum monthly income for ELI, VLI, and LI, and 35% of maximum monthly income for MOD (minus taxes and insurance), on a 30‐year mortgage with a 3.5% annual interest rate and 10% down payment.
[4] The ma ximum sale price for four‐person households at moderate income is higher than the estimated market‐rate price for townhome products in Riverside. Therefore, EPS's analysis does not include moderate‐income inclusionary requirements for townhomes.
2 3
3 Economic & Planning Systems EPS PPT Presentation | 4

INCLUSIONARY HOUSING POLICIES IN CALIFORNIA
Source: Grounded Solutions Network
Over 170 cities and counties in California
have inclusionary housing policies
Riverside
Riverside
Economic & Planning Systems EPS PPT Presentation | 5
IHP IN COMPARABLE JURISDICTIONS – FOR SALE
4 5
4 Economic & Planning Systems EPS PPT Presentation | 6
IHP IN COMPARABLE JURISDICTIONS – RENTAL
Economic & Planning Systems EPS PPT Presentation | 7

FEASIBILITY ANALYSIS
 Developed prototype rental and for-sale market-rate products that the City might see developed in the future.
 Tested feasibility of several scenarios of developing on-site affordable units, using typical return metrics
 5.25% return on cost for rental projects
 15% profit margin on for-sale projects
 Also estimated an in-lieu fee and assessed the feasibility impacts of paying fee as compared to building on-site units
– Fee calculated as subsidy needed to support development of affordable units off-site (Unit value at affordable levels – Cost of building unit) – EPS calculated fees for select inclusionary requirements – if City opts to include fee option, calculation will be updated to reflect preferred requirement
6 7
5 Economic & Planning Systems EPS PPT Presentation | 8

PROTOTYPE PRODUCTS
Mid-Density Multifamily
(~30 units/acre)
Infill Multifamily
(~60 units/acre)
Downtown Multifamily
(~100 units/acre)
Townhomes
(~15 units/acre)
Single Family Homes
(~10 units/acre)
Main & 9th Raincross Promenade The CORE
Autumn GroveCoronado Riverwalk
Economic & Planning Systems EPS PPT Presentation | 9

INCLUSIONARY SCENARIOS - RENTAL
 Scenarios for multifamily rental include:
– 15% and 10% of units for low-income households
– 10% of units for very low-income households
– In-lieu fee on 10% low-income requirement (~$13,000 per market rate unit)  Higher density projects
achieve lower return on
cost, and options for
including affordable
units are limited
 Mid-density projects
have more room to
feasibly include
affordable units
 Payment of in-lieu fee is
a feasible option

5.65%

5.26% 5.39% 5.26% 5.43%5.51%

5.07% 5.21% 5.11% 5.33%5.52%

5.07% 5.22% 5.12% 5.34%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%
No Inclusionary 15% Low 10% Low 10% Very Low In ‐Lieu Fee Mid‐Density Infill Downtown
Return
Threshold:

5.25%
8 9
6 Economic & Planning Systems EPS PPT Presentation | 10 INCLUSIONARY SCENARIOS – FOR SALE TOWNHOMES
 Scenarios for for-sale townhomes include:
– 10% of units for low-income households
– 5% of units for very low-income households
– In-lieu fee on 10% low-income requirement (~$17,000 per market rate unit)  Townhome projects achieve
yield on cost well above
threshold without affordable
units
 Both inclusionary scenarios
and payment of in-lieu fee
would still produce a feasible
yield on cost

21.6%

15.6%

17.2% 16.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%
No Inclusionary 10% Low 5% Very Low In ‐Lieu Fee
Return
Threshold:
15%
Economic & Planning Systems EPS PPT Presentation | 11
INCLUSIONARY SCENARIOS – FOR SALE SINGLE FAMILY
 Scenarios for single family detached homes include:
– 5% of units for moderate-income households
– 2% of units for very low-income households
– In-lieu fee on 5% moderate-income requirement (~$7,000 per market rate unit)  Single family projects just barely
achieve profit margin threshold
without affordable units
 Both affordable scenarios and
payment of the in-lieu fee would
produce a barely feasible profit

15.7%

14.4% 14.3% 14.5%

0.0%

5.0%

10.0%

15.0%

20.0%
No Inclusionary 5% Moderate 2% Low In ‐Lieu Fee
Return
Threshold:
15%
10 11
7 Economic & Planning Systems EPS PPT Presentation | 12

SUMMARY OF FEASIBILITY RESULTS
 For-sale single family home products are limited in feasibly providing inclusionary units
 For-sale townhomes products appear able to support inclusionary requirements, but are a less common product
 Multifamily rental products at ~30 units/acre appear to feasibly support inclusionary requirements, and are a common product  Higher-density multifamily rental products in and near Downtown tend to have higher costs, and providing affordable units is less feasible
 Payment of in-lieu fee yields a higher return than providing on-site units
Economic & Planning Systems EPS PPT Presentation | 13

STAKEHOLDER FEEDBACK
 EPS hosted two stakeholder workshops in November 2021, and presented to the Riverside Chamber of Commerce’s Economic Development Council in January 2022
 Workshop #1 included housing advocates and developers of affordable housing projects. Seven stakeholders attended the meeting, and provided following primary feedback:
– Importance of including affordable units in market-rate developments, to avoid clustering of affordable units in existing low-income areas of City – Some but not unanimous support for consideration of in-lieu fee option, as it can result in more affordable units in the long-run through funding leverage – Program should include option for land donation and/or collaboration with nonprofit builders for separate buildings to meet inclusionary requirement – would be relevant for larger projects
– Encouraging City to explore other tools for developing permanent/long-term affordable housing, including co-ops and community land trusts, and other funding sources such as transient occupancy tax (TOT)
12 13
8 Economic & Planning Systems EPS PPT Presentation | 14

STAKEHOLDER FEEDBACK
 Workshop #2 included developers of market-rate residential projects. Sixteen stakeholders attended the meeting and provided following primary feedback:
– Desire for flexibility from City in negotiating on a project-by-project basis, to reflect that every project has unique cost factors
– Concern that feasibility models may underestimate development costs, in which case financial returns are overestimated and projects may be less able to absorb the costs of inclusionary requirements
– Interest in having incentives that will reduce costs elsewhere in a project, although higher density allowances do not always improve project feasibility because construction costs can increase
– Combined with other City policies that are adding costs to development, such as VMT reduction and electrification policies, addition of inclusionary requirements can push a lot of projects into infeasibility
– Better option to get affordable units is to support building of 100% affordable projects on City-owned land; alternately, City should share in cost of inclusionary requirements somehow
Economic & Planning Systems EPS PPT Presentation | 15

COMMUNITY FEEDBACK
 EPS and City hosted a community webinar on January 12, 2022  Approximately 50 individuals signed on to meeting
 Primary feedback included:
– Overall support for an inclusionary housing policy
– Preference to require units on-site rather than allow in-lieu fee; fee should be higher than cost of providing on-site units to discourage the fee option – Questions about other means of encouraging development of affordable units, such as density bonuses (which the City and State do have)
– Stated need for provision of affordable housing that serves special needs population 14 15
9 Economic & Planning Systems EPS PPT Presentation | 16

ELEMENTS OF AN INCLUSIONARY HOUSING POLICY
Cities have wide latitude in structuring inclusionary policy – there is no “one size fits all”
 Inclusionary Requirement: Proportion of new units that must be affordable
 Affordability Levels: Income levels that are served by affordable units  Included/Exempted Developments: Can include a minimum project size or particular project types
 Requirements for rental vs. for-sale units
 District-based Requirements
 In-Lieu Fee Option
Economic & Planning Systems EPS PPT Presentation | 17

PRELIMINARY RECOMMENDATIONS
Given EPS’s research and analysis, and the stakeholder and community feedback, we would make the following preliminary recommendations to the City in developing an inclusionary housing program:

1. Inclusionary requirements
a. Multifamily – 10% of units affordable to low-income households (70% AMI)* b. Townhome - 10% of units affordable to low-income households (70% AMI) * c. Single family – 5% of units affordable to moderate-income households (110% AMI) *These requirements would automatically qualify projects for use of State density bonus

2. Develop an in-lieu fee to align with the above requirements  Allowances for payment of fee should be based on City priorities (e.g. encouraging on-site units/mixed-income properties vs. maximize local support for affordable projects)

3. Consider a phased-in approach for requirements to allow markets to adjust, and set timeline for revisiting requirements in light of new market conditions 16 17
10 Economic & Planning Systems EPS PPT Presentation | 18 Questions/Discussion
Economic & Planning Systems EPS PPT Presentation | 19

TOPICS FOR DISCUSSION/FEEDBACK
 Questions/concerns/feedback regarding recommended
inclusionary requirements
 Changes to requirements? Exemptions for any uses?
 City questions/preferences regarding use of in-lieu fee  What are the priorities?
 Timeline for program implementation
18 19
11 Economic & Planning Systems EPS PPT Presentation | 20

COMMITTEE RECOMMENDATIONS
 Receive an update on the Inclusionary Housing Program Study for the City of Riverside, including preliminary recommendations on inclusionary housing program requirements; and
 Provide staff with direction on how to proceed with the Inclusionary Housing Program Study.20
Attachment 6
Affordable Housing Resources and Tools

 HOME Investment Partnerships (HOME) Program: The City receives approximately $1.2 million of HOME funds annually from the United States Department of Housing & Ur ban Development that can be used to buy existing housing or vacant land for affordable housing; building new housing; rehabilitating existing housing; demolishi ng structures to make wa y for affordable housing; relocation; making site improvements; and paying soft costs, such as engineering plans, attorneys’ fees, title search, and fair housing services.

 Permanent Local Housing Allocation (PLHA): PLHA funds are generated through a $75 recording fee on real estate documents to increase the supply of affordable homes in California. The City first PLHA allocation was $1.6 million and the second allocation is $2.5 million. These funds are used to create affordable housing and cover ongoing bridge housing operations.

 Assembly Bill (AB) 1486 Surplus Land Act: Promote affordable housing development on unused or underutilized public land throughout the state to respond to the existing affordable housing crisis. Affordable housing developers have the “first right of refusal” or priority consideration for all City-owned land that has been declared surplus. During this period, proposals must include at least 25% of the residential units to be restricted to “affordable rent to lower income households.” If there is no interest from an affordable housing developer or public agency, staff will market the subject properties to sell them at fair market value in accordance with the City’s Administrative Manual 08.003.00, Disposition and Sale of City-Owned Real Property. If the subject properties are developed by a private developer with ten or more residential units, then 15% of the total project’s units must be restricted to “affordable rent to lower income households” as required by AB 1486. The City has received responses to Notice of Availability of Surplus Land from developers that include at least 25% of the residential units will be restricted for affordable housing.

Attachment 7
Stakeholder and Community Outreach Meeting
Primary Feedback

November 2021 Workshop #1

 Importance of including affordable units in market‐rate developments, to avoid clustering of affordable units in existing low‐income areas of the City.  Some but not unanimous support for consideration of in‐lieu fee option, as it can result in more affordable units in the long‐run through funding leverage.  Program should include option for la
nd donation and/or collaboration with nonprofit builders for separate buildings to meet inclusionary requirements – would be relevant for larger projects.
 Encouraging City to explore other tools for developing permanent/long‐term, affordable housing, including co‐ops and community land trusts, and other funding sources such as transient occupancy tax (TOT).

November 2021 Workshop #2

 Desire for flexibility from City in negotiating on a project‐by‐project basis, to reflect that every project has unique cost factors.
 Concern that feasibility models may underestimate development costs, in which case financial returns are overestimated and projects may be less able to absorb the cost of inclusionary requiremen
ts.
 Interest in having incentives that reduce costs elsewhere in a project, although higher density allowances do not always improve project feasibility because construction costs can increase.  Combined with other City policies that are adding costs to development, such as VMT reduction and electrification policies, the addition of inclusionary requirements can push many projects into infeasibility.
 Better option to get affordability units is to support the build ing of 100% affordable housing
projects on City‐owned land; alternately, City should share in cost of inclusionary requirements somehow.

January 12, 2022 Community Webinar

 Overall support for an inclusionary housing policy
 Preference to require units on‐site rather than allow in‐lieu fee; fee should be higher than cost of providing on‐site units to discourage the fee option.  Questions about other means of encouraging development of affordable units, such as density bonuses (which the City and State do hav e)
 Stated need for provision of affordable housing that serves special needs population.

Page 1 of 9 ends

Chapter 19.535. INCLUSIONARY HOUSING

19.535.010 Purpose and intent.

The purpose of this Chapter include:

A. To ensure the development and availability of decent housing to a broad range of households of varying income levels throughout the City.

B. To add affordable housing units to the City's housing stock.

C. To ensure the long-term affordability of units and availability for income-eligible households.

D. To ensure that the public and private sector partner in providing affordable housing for current and future residents of the City.

E. To integrate housing units for all income levels in new multi-family housing development and disperse units throughout the City so as not to segregate affordable housing.

19.535.020 Exemptions.

The requirements of this Chapter do not apply to:

A. Residential development projects resulting in the construction of one (1) or two (2) housing units and residential subdivisions resulting in two (2) lots.

B. The reconstruction of any structures that have been destroyed by fire, flood, earthquake or other act of nature provided that the reconstruction of the site does not increase the number of residential units by three or more.

C. Residential building additions, repairs or remodels provided that such work does not increase the number of existing units by three or more.

D. Residential development projects that have submitted all required app lication materials for land use entitlement(s), provided that those applications have been accepted for review by the City as of the effective date of this article or December 31, 2022, whichever is earlier.

19.535.030 Inclusionary requirements.

Any residential development project or parcel map that includes three (3) or more dwelling units shall provide affordable units as defined in this Section.

A. For the purposes of determining inclusionary housing requirements pursuant to this Chapter, the following income limits , as published and periodically updated for Riverside County by the State Department of Housing and Community Development, shall apply:

1. Very Low-Income – household income shall not exceed fifty percent (50%) of the area median inc ome (AMI).

2. Low-Income – household income shall not exceed seventy percent (70%) of the AMI.

3. Moderate-Income – household income shall not exceed one hundred ten percent (110%) of the AM I.

B. For-sale dwelling units. Residential development projects that include for-sale dwelling units shall provide affordable units as follows:

1. Within the boundaries of residential development project. a. In all low-density residential development projects, five (5) percent of the total number of dwelling units shall be sold at an affordable sale price for moderate-income households.

Draft Inclusionary Housing Ordinance - Proposed Title 19 Amendments Attachment 8

Page 2 of 9 ends

b. In all moderate-density or high-density dwelling unit developments:
i. Ten (10) percent of the total number of dwelling units shall be sold at an affordable sale price for low-income households.
ii. If any development was developed with the intent to rent the dwelling units and is converted to for-sale, inclusionary requirements for rental dwelling units shall apply. c. The aforementioned affordability requirements shall apply to vacant development parcels resulting from the subdivision of land by a parcel or tentative and final map.

2. Outside the boundaries of residential development project. a. For all low-density residential development projects outside the market -rate development boundaries, eight (8) percent of the total number of dwelling units shall be sold at an affordable sale price for moderate-income households.
b. For all moderate-density or high-density residential development projects, fifteen (15) percent of the total number of dwelling units shall be sold at an affordable sale price for low -income households.

C. Rental dwelling units . Residential development projects that include rental dwelling units sh all provide inclusionary units as follows:

1. Within the boundaries of residential development project , regardless of density, t en (10) percent of the total number of dwelling units shall be rented at an affordable rent for low-income households

2. Outside the boundaries of residential development project, regardless of density, fifteen ( 15) percent of the total number of dwelling units shall be rented at an affordable rent for low-income households.

3. The developer may, at its discretion, provide the required inclusionary units at an affordable rent for very low-income and low-income households.

D. Additional Requirements.

1. Any additional market-rate units that are allowed per Chapter 19.545 – Density Bonu s will not be included in the unit count used to calculate a project’s Inclusionary Housing requirements.

2. Fractional housing units or parcels shall pay an in -lieu fee in the amount determined pursuant to

19.535.080.

3. When a residential development project includes a combination of differing densities and/or tenure types (for-sale or rental) the required number of units by income level shall first be calculated for each category of dwelling units individually and then combined to determine the total inclusionary housing requirement.

19.535.040 Duration of affordability.

A. For-Sale Inclusionary Units.

1. Units must be legally restricted as for-sale and occupied by households of the income levels for which the units were designated for a term of not less than 55 years.

2. During that legally restricted term:
a. The units may be sold and resold to households of the income levels for which the units were designated at an affordable sales price for those households; or b. The sale shall be subject to an equity reimbursement requirement pursuant to this Chapter.

B. Rental Inclusionary Units.

Page 3 of 9 ends

1. Units must be legally restricted as rental and occupied by households in the income level for which the units are developed for a term of not less than 55 years.

2. Units developed on property owned by the City, and leased to a residential developer, must be legally restricted as rental and occupied by households in the income level for which the units were developed for the duration of the land lease term.

C. To ensure compliance with the duration requirement, an Affordable Housing Agreement and, if applicable, a Resale Restriction Agreement shall be recorded for every inclusionary unit as prescribed by the City.

19.535.050 Development standards.

A. All Inclusionary units – On-site – Unless otherwise specified by the City Council, inclusionary units shall be developed and incorporated in the residential development project in a manner consistent with the following requirements:

1. Location.
a. Inclusionary units shall be integrated throughout a residential development project and not clustered in a specific portion of the development.
b. The location of the inclusionary units within a residential development project shall be designated before issuance of building permits for the development.

2. The bedroom mix for the inclusionary units must be proportional to the bedroom mix of the market rate units.

3. The floor area of inclusionary units may be up to 10 percent smaller than the market -rate units in the project.

4. The interior finishes, features, and appliance packages must be comparable to the base level interior finishes for the market-rate units.

5. For-sale inclusionary units shall provide comparable infrastructure services (including sewer, water and other utilities), construction quality and exterior design to the market-rate units.

6. Residents and tenants of affordable units shall be provided the same rights and access to common amenities as residents and tenants occupying market-rate units.

7. Construction Timing.
a. The inclusionary units shall be built concurrently with the market rate units in the residential development project.
b. The inclusionary units may be constructed in phases if the market rate units are constructed in phases, provided that the percentage of inclusionary units is equivalent to or greater than the percentage of market rate units during each phase.

B. Inclusionary units outside the boundary of residential development projects – Unless otherwise specified by the City Council , inclusionary units constructed outside the boundaries of the market -rate residential development project shall comply with the following requirements:

1. The developer of the market -rate residential development project may enter into an agreement with an affordable housing developer to construct, own and operate the inclusionary units, subject to the following requirements:
a. The affordable housing developer:
i. Must provide support information for similar projects/ experience within the last 3 -5 years developing affordable housing.
ii. Shall be responsible for all financing all inclusionary units.

Page 4 of 9 ends

b. A market-rate residential development project that satisfies its inclusionary requirement with off- site inclusionary units shall not be eligible for a density bonus, concessions, incentives or waivers pursuant to Chapter 19.545 – Density Bonus.
c. The inclusi onary units constructed outside the boundary of the market-rate residential development project to satisfy the inclusionary requirement shall be eligible for a d ensity bonus pursuant to 19.545.
d. All discretionary approvals and financing for the inclus ionary units must be secured prior to the market-rate, for-sale component commencing construction.

2. All units developed outside the boundaries of the residential development project must be constructed within the same Ward of the City as the market-rate residential development project.

3. The inclusionary units shall not create an over-concentration as follows:
a. No more than 100 deed restricted very low- or low-income dwelling units within 500 feet of the proposed inclusionary units; or
b. No more than 400 deed restricted very low- or low-income dwelling units within 1500 feet of the proposed inclusionary units.

4. The bedroom mix for the inclusionary units must be proportional to the bedroom mix of the market rate project.

5. The floor area of inclusionary units may be up to 10 percent smaller than the units in the market-rate project.

6. The interior fini shes, features, appliance packages, and infrastructure services for inclusionary units shall comply with the standards established or approved by the California Tax Credit Allocation Committee for residential units developed pursuant to the federal low -income housing tax credit program.

19.535.070 Marketing inclusionary units.

A. The developer must market the inclusionary units to eligible residents of the City of Riverside.

B. Marketing includes, at a minimum, the following:

1. Notifying local government and nonprofit agencies serving income -qualified households in the City of Riverside, as identified by the City, of the availability of affordable units no later than 90 days after the issuance of building permits.

2. Placing a sign on the property advertising the availability of the affordable units including contact information.

3. Advertising the availability of the affordable units on social media outlets and local newspapers in multiple languages.

19.535.080 In-Lieu Fee Alternative.

A. As an alterna tive to constructing inclusionary units as required by this Chapter, all or a portion of the inclusionary housing requirement may be fulfilled through the payment of in -lieu fees, pursuant to the fee schedule adopted by the City Council.

B. The in-lieu fees shall be based on the percentage of affordable units required if the inclusionary units were provided outside the boundaries of the market-rate residential development project, pursuant to

19.535.030.

C. Calculation of Fees.

Page 5 of 9 ends

1. In-lieu fees shal l be paid for any fractional inclusionary unit based on the calculation of the required number of inclusionary units.

2. The developer may voluntarily commit to round the fractional inclusionary unit up to the next whole unit for the in-lieu fee.

D. Payment of Fees.

1. The required in -lieu fees shall be paid at the issuance of the first building permit for the residential development project.

2. For phased projects, the developer may pay a pro rata share of the in -lieu fee, based on both the number of phases and units in each phase, at the issuance of the first building permit for each phase of the residential development project.

E. All collected in-lieu fees for inclusionary housing units shall be deposited in the Inclusionary Housing Fund pursuant to 19.535.130.

19.535.090 Requirements For Selling For-Sale Inclusionary Units.

A. The initial sales price, and any resale price, will be at an affordable sales price for the income level for which the units are designated for the duration of affordability per 19.535.040.

B. At the time of sale, the City will determine the Initial Equity for the unit, which will equal the difference between the Fair Market Value of the unit as determined by an FHA-style appraisal and the affordable sales price.

C. A Resale Restriction Agreement must be entered into for any c hange of ownership maintaining the household income restriction for the duration of affordability per 19.535.040.

D. All for-sale inclusionary units are subject to the following:

1. The person that purchases the inclusionary unit, owner, shall use and occupy it as their principal/primary dwelling.

2. The owner is expressly prohibited from leasing or renting the inclusionary unit unless the City has given prior written consent to such lease or rental on the basis of a demonstrated hardship by the owner.

3. Certificate of Continued Occupancy.
a. A Certificate of Continued Occupancy shall be submitted annually to the City on a City -provided form.
b. Default.
i. If the owner fails to submit the annual report in as required, notice will be given by the City of Riverside.
ii. If within 30-days after receiving the notice from the City, a Certificate of Continued Occupancy is not submitted, the owner will receive a second notice. iii. If within 30 -days after receiving the second notice from the City, a C ertificate of Continued Occupancy is not submitted, the matter will be referred to the City Attorney ’s Office.

E. Initial Equity Reimbursements.

1. If the owner plans to sell the inclusionary unit during the duration of affordability , and the potential owner’s household income exceeds the income level, and/or at a price that exceeds the affordable housing cost for which the units are designated , the own er shall pay to the City a percentage of the Initial Equity as calculated per this Chapter.

2. The percentage of the Initial Equity to be paid to the City shall be determined as follows:

Page 6 of 9 ends

a. Between years 0 and 10, 100%;
b. Between years 11 and 20, 80%;
c. Between years 21 and 30, 60%;
d. Between years 31 and 40, 40%;
e. Between years 41 and 50, 20%; and
f. Between years 51 and 55, 10%.

3. No percentage of the Initial Equity shall be required for any sale occurring after the duration of affordability.

19.535.100 Requirements for Occupancy of Inclusionary Rental Units.

A. All rental inclusionary units shall be rented to households in the appropriate income category for the inclusionary units.

B. The developer shall designate and offer rental inclusionary units for-rent to households in the appropriate income category, based on the approved Inclusionary Housing Plan.

C. The maximum allowable rent of inclusionary units will be based on the applicable income levels for the inclusionary units.

D. Annual report.

1. The owner of the rental property shall submit an annual report to the City on a City-provided form.

2. The annual report shall include the following:
a. A summary of documents reviewed by the owner for each inclusionary unit that demonstrate the prospective renter's total income (such as income tax returns or W -2s for the previous calendar year).
b. The occupancy of each rental inclusionary unit for the year.

3. Default
a. If the owner of the rental property fails to submit the annual report in as required, notice will be given by the City of Riverside.
b. If within 30 -days after receiving the notice from the City, an annual report is not submitted, the owner will receive a second notice.
c. If within 30-days after receiving the second notice from the City, an annual report is not submitted, the matter will be referred to the City Attorney’s Office.

19.535.110 Adjustments or Waivers to Inclusionary Requirements.

A. Any developer must apply for an adjustment or waiver of these requirements with their application for any discretionary or ministerial permit for the residential development project.

B. Reasons for Adjustments or Waivers.

1. The requirements of the Chapter may be adjusted or waived if the applicant demonstrates that applying the requirement would take property in violation of the United States or California Constitutions.
a. If the City Manager, or his/her designee, determines that applying the requirement s of this Chapter, including any variances or regulatory concessions /incentives would take property in violation of the United States or California Constitutions, the requirements of this program may be

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modified, adjusted or waived to reduce the obligations to the extent necessary to avoid an unconstitutional result.
b. If the City Manager, or his/her designee, determines no violation of the United States or California Constitutions would occur through application of this Chapter , the requirements remain applicable.

2. The City Manager , or his/her designee, shall review any reque sts for an adjustment or waiver application and issue a written decision.

C. In making the (adjustment or waiver) determination, the City Manager or City Council, as applicable shall assume each of the following:
a. Application of the inclusionary housing requirement to the residential development project; b. Application of any applicable inclusionary or density bonus concessions, incentives or waivers; c. Utilization of the most cost-efficient product type for the inclusionary units; and d. The potential for the external funding, including but not limited to, governmental grants, loans, or subsidies of any nature where reasonably likely to occur.

19.535.120 Appeals of City Manager Decisions on Inclusionary Requirements.

A. The decision of the City Manager, or his/her designee, may be appealed by submitting, in writing, the basis for the appeal.

B. The appeal shall be submitted to the City Clerk within ten (10) days of receipt of the decision.

C. The City Council shall hear the appeal at a time agreed by the appellant and the City.

D. The decision of City Council's decision shall be final.

19.535.120 Compliance Requirements and Procedures.

E. Inclusionary Housing Plan.

1. As part of any application for residential development projects, a n Inclusionary Housing Plan shall be required for all residential development projects subject to this Chapter as prescribed by the City.

2. The Inclusionary Housing Plan shall be approved concurrently with the residential development project application and shall include the following:
a. Project specifics.
i. Description of the residential development project including the number of for-sale or rental units.
ii. Methods to meet the inclusionary housing requirements. iii. The number, unit type, tenure, number of bedrooms, approximate location, size and design, construction and completion schedule of all inclusionary units. iv. Compliance with al l outside the boundary requirements for the residential development project.
v. If applicable, p hasing plans including the relationship of construction timing for inclusionary units and market rate units.
vi. If applicable, the in-lieu fees to be paid by applicant. vii. Any other information requested by the City Manager, or his/her designee, that will assist with evaluation of the plan under the requirements of this Chapter.

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b. Recording requirements include:
i. A legal instrument, as specified by the City, shall be recorded against every inclusionary unit to ensure its affordability.
ii. A recordable Affordable Housing Agreemen t, as defined in this Chapter, entered into by the applicant and any other necessary party.
c. All required in-lieu fees shall be paid at the time per 19.535.080.

3. Discretionary Decisions.
a. If the residential development project requires discretionary approval, the Inclusionary Housing Plan shall be considered with the project application.
b. Discretionary decisions related to residential development projects that include inclusionary units may be appealed in accordance with the appeals procedures in this Title .

4. Ministerial Approval.

If the residential development project does not require discretionary approvals, the Inclusionary Housing Plan shall be approved by the Community & Economic Development Director , or his/her designee, prior to issuing the ministerial permit.

F. Affordable Housing Agreement.

1. An approved Affordable Housing Agreement shall be required for residential development projects subject to this Chapter.

2. Form of Agreement.
a. The Affordable Housing Agreement , and any related declarations, resale restrictions, deeds of trust, and other documents, shall be in a form as prescribed by the City; b. The Affordable Housing Agreement shall be approved by the City Manager , or his/her designee, and approved as to form by the City Attorney prior to final execution.

3. Recording Requirements.
a. The Affordable Housing Agreement must be recorded against every individual inclusionary unit or the residential development project in its entirety.
b. Building permits shall not be issued for any residential development project until:
i. The Affordable Housing Agreement is executed by the owner, the applicant (if not the owner) and the City;
ii. The Agreement is recorded against the property; and iii. The payment of in-lieu fee is paid, if applicable. c. The Affordable Housing Agreement shall specify that the applicant must develop the required inclusionary housing units and comply with all terms of the approved Inclusionary Housing Plan as defined in this Chapter.
d. Resale restrictions, deeds of trust, and/or other documents as deemed necessary by the City Manager, or his/her designee, shall be recorded against all for-sale inclusionary units.

19.535.130 Administration.

A. The City Manager, or his/her designee, is authorized to initiate any administrative procedures necessary to implement the purpose and intent of this Chapter.

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B. The City Manager, or his/her designee, may prepare necessary forms related to the implementation of this Chapter.

1. Forms needed for implementation may be introduced as deemed necessary.

2. All forms or administrative procedures shall be carried out in a manner consistent with the purposes and intent of this Chapter and the City’s General Plan.

C. In-Lieu Fees – Inclusionary Housing Fund

1. Unless otherwise required by law, all in -lieu fees and funds collected pursuant to this Chapter shall be deposited into a separate account designated as the City of Riverside Inclusionary Housing Fund, to be established by resolution of the City Council.

2. The moneys in the Inclusionary Housing Fund , and all earnings from investment of the moneys , shall be expended exclusively to provide housing affordable to extremely low-income, very low-income, low- income, and moderate -income households in the City of Riverside inclusive of administration and compliance monitoring.

19.535.140 Enforcement.

A. The City Attorney shall be authorized to enforce the provisions of this Chapter and all requirements placed on inclusionary units by civil action and any other proceeding or method permitted by law.

B. The City may, at its discretion, take such enforcement action as is authorized by the Riverside Municipal Code and/or any other action a uthorized by law or any regulatory document, restriction, or agreement executed under this Chapter.

C. Failure of any official or agency to fulfill the requirements of this Chapter shall not excuse any applicant or owner from the requirements.

D. No permit, license, map, or other approval or discretionary approval for a residential development project shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements are satisfied.

E. Any remedies provided shall be cumulative and not exclusive and shall not preclude the City from any other remedy or relief to which it otherwise would be entitled under law or equity. .
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Inclusionary Housing
Policy and Ordinance
FAQs
City of Riverside
What is Inclusionary Housing?
Inclusionary housing is a policy that requires a
prescribed portion of the homes in any new
residential projects (such as apartment buildings or
housing subdivisions) be rented or sold at a price that is affordable to households and families earning
specific income.

Why is an Inclusionary Housing Policy
needed?
An inclusionary housing policy helps increase the
number of affordable homes throughou t the City.

Increasing the number of affordable homes will
promote equity in the City by providing opportunities
for families of all income levels to be able to afford to live in Riverside. Inclusionary housing is just one of
several tools available to cit ies to promote and
support the development of more affordable homes.

Are there any exemptions to the Policy?
Yes. Residential development projects resulting in the
construction of one (1) or two (2) housing units and
residential subdivisions resulting in two (2) lots.

What does affordable housing mean?
Generally, affordable means that a household will
not spend more than 30% of their gross income on
monthly housing costs including rents, utilities and
other fixed costs. For example, a household with an
income of $60,000 should spen d no more than
$20,000 per year for housing costs (or $1,667/month).

What are affordable rents or sale prices?
Affordable rents and sale prices are calculated
based on different categories of household income
as defined by the State and Federal governments.

The categories include Very Low Income, Low
Income, and Moderate Income , which refer certain
percentages of the Area Median Income (AMI) for
households in each county, updated annually.

Is there a minimum term of affordability for the
Inclusionary Housing units?
The affordability Term varies based on the type of
unit. For example:
• Rental units: 55 years
• For-sale units: 45 years, repayment if sold to
non-income eligible homebuyer
• 99-year lease on Housing Authority -owned
properties
What percentage of new housing project units
must be available as affordable units?
This varies depending if the units are for rent or for sale and if they are built on- or off-site.

For on-site:
• For-sale single family developme nts - 5% of
units affordable to Moderate -Income
households
• For-sale townhome and condominium
developments - 10% of units affordable to
Low-Income households
• Rental developments - 10% of units affordable
to Low-Income households
For off-site, the percentage is increased as follows:
• For-sale single family developments - 8% of
units affordable to Moderate -Income
households
• For-sale townhome and condominium
developments - 15% of units affordable to
Low-Income households
• Rental developments - 15% of units affordable
to Low-Income households
Where will off-site units be built?
Any units not built on-site must be built within the Ward at the higher off-site percentage.

Are there alternatives to providing the
Inclusionary Housing Units?
An in-lieu fee that can be paid if the units are not built is included in the Inclusionary Housing Policy and
Ordinance. The fee would be paid fo r all or a portion
of the inclusionary housing requirement s. The In- lieu fees are based on the percentage of affordable units
required if the inclusionary units were provided outside the boundaries (a higher percentage than if they
were built). The in-lieu fee would a lso be required for any fractional units required for multifamily and
townhome projects.

Where can I get more information or share
comments on the Inclusionary Housing
Ordinance?
You can contact the City of Riverside Housing
Authority: (951) 826-5649 ([email protected]).

You may also contact the City Planning Division: (951)
826-5800 ([email protected]).

Attachment 9
Attachment 10
Feasibility Analysis

Figure 1: Multifamily Rental Development
 15% and 10% of units for low‐income households
 10% of units for very low‐income households

Figure 2: For‐Sale Condos/Townhomes

 10% of units for low‐income households
 5% of units for very low‐income househo lds

Figure 3: For‐Sale Single‐Family

 5% of units for moderate‐income households
 2% of units for low‐income households

Housing and Homelessness CommitteeOctober 23, 2023

Housing and Homelessness Committee
October 23, 2023