1 Economic & Planning Systems, Inc.
The Economics of Land Use
800 Wilshire Blvd., Suite 410 Los Angeles, CA 90017
213.489.3838 www.epsys.com
Economic & Planning Systems, Inc.
The Economics of Land Use
CITY OF RIVERSIDE
INCLUSIONARY HOUSING
PROGRAM FEASIBILITY STUDY
UPDATE
Housing and Homelessness
Committee Meeting October
23, 2023
Economic & Planning Systems EPS PPT Presentation | 1
AGENDA
Overview of Study Process
Review of Previous Feasibility Findings
Updated Feasibility Findings
In-Lieu Fee Calculation Overview
Next Steps
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2 Economic & Planning Systems EPS PPT Presentation | 2
OVERVIEW OF STUDY PROCESS
•EPS engaged by City
May 2021
•EPS preliminary technical analysis
June-August 2021
•Preliminary findings to HHC
September 2021
•Stakeholder and Community Meetings
November 2021-January 2022
•EPS and City staff work on nexus study and ordinance framework; Additional meetings and guidance received from HHC
February-June 2022
•Presentations to Planning Commission
October and November 2022
•City Council Study Session
April 2023
REVIEW OF 2022 FEASIBILITY FINDINGS
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3 Economic & Planning Systems EPS PPT Presentation | 4
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 15% low-income requirement (~$22,300 per market rate unit) Recommended requirement: 10% Low on-site, 15% Low off-site Economic & Planning Systems EPS PPT Presentation | 5
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 15% low-income requirement (~$23,500 per market rate unit) Recommended requirement: 10% Low on-site, 15% Low off-site 4 5
4 Economic & Planning Systems EPS PPT Presentation | 6
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 8% moderate-income requirement (~$8,400 per market rate unit) Recommended requirement: 5% Moderate on-site, 8% Moderate off-site 2023 FEASIBILITY FINDINGS
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5 Economic & Planning Systems EPS PPT Presentation | 8
CHANGES TO ANALYTICAL ASSUMPTIONS
Costs:
– Construction costs
increased by
approximately 8%
Revenues:
– Market-Rate Apartment
Rents increased by 3%
– Sale prices increased by
25%
– Affordable incomes
increased by 8%
100
105
110
115
120
125
2022 2023
Riverside Housing Cost and Revenue Assumptions Changes, 2022‐2023 Construction Costs Market‐Rate Rents Market‐Rate Sale Prices Affordable Incomes Cost /Revenue Index
Sources: Rider Levett Bucknall; CoStar; Zillow; EPS
Economic & Planning Systems EPS PPT Presentation | 9
AFFORDABLE RATES BY INCOME CATEGORY (2023)
For‐Sale Low‐Density Single‐
Family Units
For‐Sale Moderate/High‐
Density Single Family UnitsMultifamily Rental UnitsIncome Category
Maximum Sale Price
(4‐bedroom unit)
Max Income
(5 person HH)
Maximum Sale Price
(3‐bedroom unit)
Max Income
(4 person HH)
Max Monthly Rent
(2‐bedroom unit)
Max Income
(3 person HH)
$280,942 $72,864 $246,005 $67,473 $1,518 $60,726 Low Income (70% AMI)
$557,419 $112,255 $500,393 $103,950 $2,729 $93,555 Moderate Income (110% AMI)
$750,000 $515,000 $2,650Market Rates
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6 Economic & Planning Systems EPS PPT Presentation | 10
INCLUSIONARY SCENARIOS - RENTAL
Scenarios for multifamily rental include:
– 15%, 10%, and 5% of units for low-income households
– 10% of units for very low-income households
– In-lieu fee on 15% low-income requirement (~$28,000 per market rate unit) Multifamily development is challenging in current economic environment; unlikely to support inclusionary requirement in near term Economic & Planning Systems EPS PPT Presentation | 11
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 15% low-income requirement (~$30,500 per market rate unit) Current recommended requirement still feasible
10 11
7 Economic & Planning Systems EPS PPT Presentation | 12 INCLUSIONARY SCENARIOS – FOR-SALE SINGLE-FAMILY
Scenarios for single family detached homes include:
– 5% of units for moderate-income households
– 2% of units for low-income households
– In-lieu fee on 8% moderate-income requirement (~$14,000 per market rate unit) Current recommended requirement still feasible
Economic & Planning Systems EPS PPT Presentation | 13
RECOMMENDATIONS FOR ORDINANCE
Multifamily Rental Apartments – No inclusionary requirement until market conditions improve
High-Density For-Sale Single Family (e.g. Townhome)
– 10% of units affordable to low-income households (70% AMI)* if provided on-site, – 15% of units affordable to low-income households if provided off-site, or – Payment of an in-lieu fee
Low-Density For-Sale Single Family
– 5% of units affordable to moderate-income households (110% AMI) if provided on- site,
– 8% of units affordable to moderate-income households if provided off-site, or – Payment of an in-lieu fee
Review program and conduct updated feasibility analysis within two years 12 13
8 IN-LIEU FEE METHODOLOGY
Economic & Planning Systems EPS PPT Presentation | 15
IN-LIEU FEES
In-lieu fee serves as an alternative means of compliance with inclusionary requirement, as required by State law
Fee level is commonly calculated as financial subsidy (or “gap”) needed to finance construction of the affordable units that the development is not providing on-site
Financing Gap = Cost to Build Unit - Value of Unit (at affordable rents/prices) Fee revenues are collected in a dedicated fund used to support production and preservation of affordable housing units in the City 14 15
9 Economic & Planning Systems EPS PPT Presentation | 16
ESTIMATED IN-LIEU FEE CALCULATION
Committee’s previous
guidance was to base fee
on inclusionary
requirements for building
off-site units:
– 15% of units affordable
to low-income
households for high-
density single family
– 8% of units affordable to
moderate-income
households for low-
density single family
Item Formula
High‐Density
Single Family
For‐Sale
Low Density Single
Family
For‐Sale
Affordability Level Low ‐Income Moderate ‐Income
Value Per Unit a $246,005 $557,419
Cost Per Unit b $449,661 $731,626
Subsidy Per Unit c = a‐b ($203,655) ($174,208)
Fee Per Affordable Unit c $203,655 $174,208
Inclusionary Percentage for In‐Lieu Fees d 15% 8%
Fee Per Market Rate Unit e = c*d $30,548 $13,937
Average Unit Size f 1500 2500
Fee Per Affordable Sq. Ft. g = c/f $135.77 $69.68
Fee Per Market Rate Sq. Ft. h = g*d $20.37 $5.57
Unit Type
Economic & Planning Systems EPS PPT Presentation | 17
IN-LIEU FEE COMPARISON
NotesMultifamily RentalTownhome/ Condo
For-Sale
Single-Family For-
SaleCity
Per
Market
Rate
Sq. Ft.
Per
Market-
Rate
Unit
Per
Market
Rate Sq.
Ft.
Per
Market-
Rate Unit
Per
Market
Rate Sq.
Ft.
Per
Market-
Rate Unit
No
inclusionary
requirement
on rental
projects
N/AN/AN/A$1,350N/A$1,350Fontana
N/A$3,750N/A$3,750N/A$3,750Highland
N/A$17,000N/A$17,000N/A$17,000Irvine
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10 Economic & Planning Systems EPS PPT Presentation | 18
IN-LIEU FEE COMPARISON
NotesMultifamily RentalTownhome/ Condo
For-Sale
Single-Family For-
SaleCity
Per
Market
Rate Sq.
Ft.
Per
Market-
Rate Unit
Per
Market
Rate Sq.
Ft.
Per
Market-
Rate Unit
Per
Market
Rate Sq.
Ft.
Per
Market-
Rate Unit
Fee
charged
based on
size of
project
$0.33-
$0.92N/A$0.33-
$9.30N/A$0.41-
$11.40N/APomona
Per unit
fees are
only
illustrative;
fee
charged
per sq. ft.
$2.00$1,900$2.00$2,400$2.00$5,000Jurupa Valley
Economic & Planning Systems EPS PPT Presentation | 19
RECOMMENDATIONS
That the Housing and Homelessness Committee:
1. Receive an update on the Inclusionary Housing
Program study for the City of Riverside, including
preliminary recommendations on elements of a
potential inclusionary housing ordinance;
2. Provide direction on the draft Inclusionary Housing
Ordinance.
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