MEMORANDUM
To: Manira Sandhir, City of San Mateo
From: Darin Smith and Andrew Williams
Subject: San Mateo Inclusionary Housing Ordinance Amendment to Promote Family Units; EPS #231040
Date: April 11, 2024
Background
The Economics of Land Use
The City of San Mateo ("City") is considering updating its Inclusionary Housing Policy (Inclusionary Policy) to meet demand for family housing through the increased production of three- bedroom units. The City's 2023-2031 Housing Element contains EPS policies and programs to address the need to increase housing units that can accommodate families and reviewing the City's Inclusionary Policy is part of this process.
The City engaged Economic & Planning Systems, Inc. (EPS) to evaluate policy options that will target the construction of larger new housing units to meet family demand through the City's Inclusionary Policy. To accomplish this task, EPS developed a menu of inclusionary policy options with guidance from City staff that evaluated the feasibility and economic impacts of adapting inclusionary requirements. As it stands, the current City Inclusionary Policy requires 15 percent of rental units in a new development to be reserved as Low- or Very Low-income units, with the expectation that these Below Market Rate (BMR) units will have sizes and bedroom counts comparable to the mix of market-rate units in the project. As an alternative compliance measure within the City's Inclusionary Policy, developers can reserve as few as 10 percent of rental units as low-income if the total number of BMR bedrooms is at least 15 percent of all Economic & Planning Systems, Inc. bedrooms in the project. 1330 Broadway
Suite 450 This memorandum details the larger context of the City's Oakland, CA 94612 Inclusionary Policy and housing demand, EPS's methodology and 510 841 9190 tel
development assumptions, and the multiple project and policy Oakland scenarios analyzed. EPS anticipates that this memorandum will Sacramento be used by City staff and elected officials to guide decision- Denver making for updating the City's Inclusionary Policy to address the Los Angeles corresponding policies and programs in the Housing Element. 231040_Inclusionary_Memo_04_11_24_Final.docx
www.epsys.com
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Key Findings
1. San Mateo census, housing market, and internal City data reveal there is a need for larger bedroom units to accommodate family housing. There are relatively few market-rate and BMR three-bedroom rental units in the city.
Data from CoStar Group indicates three plus-bedroom units have made up only seven percent of total units in new multi-family market-rate construction in San Mateo in the last five years or 60 units out of 826 total units. From City data, three-bedroom units represent only four percent of the city's total BMR unit supply, or 13 units out of 330 total units. However, the need for these larger units is much greater as 20 percent of the city's overall households and households on the City's affordable housing waiting list have four or more people.
2. New development projects in the San Mateo housing market as well as the San Francisco Bay region generally face feasibility challenges under near-term market conditions. Recent increases in development costs, increased interest rates, reduced availability of construction financing, and relatively modest increases in achievable rents - all exacerbated by the pandemic - have made new residential construction difficult to finance due to lower returns on investment. Still, developers in San Mateo have built 1,417 market-rate, multi- family units in the last 10 years, 826 units in the last five years, and 64 units in 2023. Additionally, the City has entitled 2,141 total units since 2018, with 20 percent of those units representing Low or Very-Low Income units according to data provided by the City to the State Department of Housing and Community Development (HCD).
3. Adopting a new inclusionary requirement that mandates a dedicated portion of inclusionary units as three-bedroom units does not have a strong impact on general project feasibility. While housing development faces feasibility challenges generally under the current market conditions driven by external factors, an Inclusionary Policy change that would require up to 20 percent of BMR units to have three or more-bedrooms appears only to marginally impact a project's bottom line. EPS estimates that such a change in policy would lower a project's "yield on cost" feasibility metric by less than one percent compared to the results under the City's baseline policy, indicating a negligible impact.
4. The City has an alternative inclusionary program measure that is in effect and underutilized despite indications that it may enhance feasibility compared to the standard inclusionary policy. Developers can alternatively provide as few as ten percent of their units as BMR units instead of the 15 percent normally required by the City if those fewer BMR units still sum to 15 percent of the overall project's bedrooms. This alternative measure can lead to larger units, and EPS analysis suggests it would enhance feasibility relative to the standard approach of providing 15 percent of units as affordable. However, EPS understands that no developer has exercised this mechanism yet. The City could Draft Memorandum: San Mateo Inclusionary Family Units
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explore options to better market and understand why this option is not being used more widely.
5. The City could adopt an updated Inclusionary Policy requiring up to one out of every five BMR units, or 20 percent, be three-bedroom units. Such a requirement does not appear to materially impact project feasibility. A project with 33 total units or greater would be required to provide at least five BMR units under the City's current 15 percent Inclusionary Policy, so that 33-unit threshold could be used as the minimum size of project required to provide at least one three-bedroom unit.
Study Area Context
To better understand the City's push for additional family sized units, the following section aims to detail changing population metrics by looking at the broader context of population housing supply and demand by comparing the gap between the two.
Housing Demand by Household Size
Affordable housing standards typically require that units be offered to appropriately sized households. For projects without federal assistance, household size is set at the number of bedrooms in a unit plus one, while those with federal assistance, household size may be set by multiplying 1.5 by the number of bedrooms in a unit. For this analysis, the number of people assumed to occupy a unit is equal to the number of bedrooms plus one, so that a three-bedroom unit would be occupied by a four-person household. It should also be noted that some households can occupy multiple unit sizes. For example, one-person households can occupy both studio and one-bedroom units and two-person households can occupy one- and two-bedroom units. Consequently, some households occupy units beyond their headcount, reducing the availability of larger units for larger families.
Table 1 below details the population metric breakdown between the city and the county.
For both the city and county, one- and two-person households make up the majority of households, representing 60 percent of total households in the city and 52 percent in the county. However, large households still make up a signification portion of the total households with four-person households representing 20 percent of the city's total households and representing 24 percent of county households.
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Table 1 San Mateo City and County Population Metrics
City of San Mateo San Mateo County
Description Count Percentage Count Percentage
Population
Total Population (2011) 94,506 701,468
:
Total Population (2021) 103,626 752,859
Change 10% 7% -
Median Household Income (2021) $181,897 $196,442
Total Households 40,233 100% 264,892 100%
1-person household 11,717 29% 59,701 23%
2-person household 11,698 29% 76,058 29%
3-person household 5,735 14% 45,236 17%
4-person or more household 7,987 20% 63,641 24%
Non family, Not Living Together 3,096 8% 20,256 8%
Source: ACS 5-Year, Ecoomic & Planning Systems, Inc.
Further, the city's smallest and largest households appear to have the greatest income- based need as seen in Figure 1. Generally, Census data! suggests San Mateo households have higher median incomes than those set by the HCD for affordability standards.
However, the actual median income for six- and seven-person households in the city fall below the HCD median income figures for such households, indicating more than half of such households would qualify for affordable housing. This indicates a clear need for larger BMR family-sized units in San Mateo.
1 EPS compares 2021 Census-based income data by household size to 2021 HCD income limits because no more recent Census data was available at the same scale at the time of this analysis, Draft Memorandum: San Mateo Inclusionary Family Units
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Figure 1 2021 Median Income by Household Size for the City and County with HCD Affordability Limits
$250,000
$200,000
$150,000
$100,000
$50,000
1-person hhld 4-person hid 5-person hhld 6-person hhld
Household Size
• City of San Mateo • San Mateo County • HCD Median Income 2021 Source: City of San Mateo, HCD, U.S. Census, Economic & Planning Systems, Inc.
The City's BMR Waiting List from 2018-2023 shown in Figure 2, illustrates the unmet demand for BMR units in the city. Households that would occupy a three-bedroom unit represent a significant figure. Four-person plus households represent about 20 percent of households and 35 percent of the entire population on the BMR Waiting List.
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Figure 2 Households on the San Mateo Waiting List by Household Size 2018-2023 160
140
120
100
Count of Households 80
60 40
20 1 PPL 2 PPL 3 PPL 4+ PPL
Household Size
Source: City of San Mateo, Economic & Planning Systems, Inc.
Housing Supply
Figure 3 illustrates the BMR housing stock in the city. Studio and one-bedroom units make up 60 percent of the total BMR housing stock, similar to the proportion of one- and two person households in the city. However, 3-bedroom units make up just four percent of the BMR housing stock. The BMR rental supply in the city caters to very low-and low- income one and two-bedroom units, with none of the three+ bedroom units priced at very low incomes.
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Figure 3 San Mateo Inclusionary Housing Supply by Size and Income Level 200
180
160
140
120
Number of Units 100
80 60
40 20
Studio 1-BR 2-BR 3-BR 4-BR
Unit Size
• Very Low • Low • Moderate • Unknown • BMR/FTB Sales
Source: City of San Mateo, Economic & Planning Systems, Inc.
Figure 4 shows similar issues with the production of market housing in the last five years. Since 2018, the broader market has supplied mostly studios, one-and two- bedroom units with relatively few three-bedroom or larger units constructed.
Figure 4 Market Rate Multifamily Development in San Mateo from 2018-2023 400
350
300
200
100
50 Studio 1BR 2BR 3BR 4BR
Unit Type
Source: CoStar Group, Economic & Planning Systems, Inc.
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Demand Unmet: The Need for Larger Units
The supply and demand relationship of BMR units in San Mateo reflects a shortage of both studio and three-bedroom units, shown below in Figure 5. The three-bedroom supply meets just 14 percent of BMR demand in the past five years. The shortage of three-bedroom units is also reflected when comparing the relationship between the BMR Waitlist and BMR units with the city's total households, visualized in Figure 6. The actual San Mateo population raw numbers of those representing a four-person or lager household (represented by the three-bedroom count) are significant compared to the populations that would occupy either a studio, one-, or two-bedroom unit, reiterating a pressing demand for larger unit sizes.
Figure 5 San Mateo BMR Waitlist and BMR Units Comparison 180
160
Units : 140
120
100
80 60
40 20
Studio 1BR 2BR 3BR
Unit Size
• BMR Waitlist • BMR Units
Source: CoStar Group, Economic & Planning Systems, Inc.
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Figure 6 San Mateo BMR Supply, BMR Waitlist, and City Household Breakdown by Unit Size 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
BMR Waitlist BMR Units SM Households
• Studio • 1BR •2BR •3BR
Source: City of San Mateo, U.S. Census; Economic & Planning Systems, Inc.
Analytical Approach Methodology
The assessment of financial feasibility for real estate development projects is based on estimating development costs and potential revenue from rents or sale prices and calculating associated financial return metrics. These return metrics reflect the value of investing in a development project and are a critical element in informing a developer's "go/no-go" decision. If a project is not expected to meet these targets, it is unlikely that the project will be able to attract investors and unlikely that it will be built.
In this analysis of income-producing rental development projects, the feasibility threshold is based on the return metric of "yield-on-cost," calculated by dividing the annual net operating income (NOI) once the project is complete and occupied by the total costs of development. Yield-on-cost estimates are used widely in the real estate industry as one of several key metrics to assess the performance and profitability of a development project. Based on current market data, EPS believes that developers in San Mateo will require a yield-on-cost of at least 5.5 percent. A yield-on-cost percentage lower than 5.5 percent indicates developers would face a more challenging environment where developers could see lower profitability and other financial obstacles.
The model for this analysis was developed to compare the financial return of different projects using multiple densities under a selection of policy scenarios. Through this modeling, EPS engaged in an array of sensitivity testing to explore the impacts of stipulating the creation of larger bedroom units.
It is important to note that the feasibility analyses contained in this memorandum are based on simplified, generic prototypes meant to represent a typical or average Memorandum: San Mateo Inclusionary Family Units
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development project. A developer's choice to ultimately pursue a residential development project in San Mateo will be site-specific and depend on many factors that are impacted by regional market forces. While our analysis accounts for some of these factors, the cost and revenue expectations for a particular project will vary based on the size, location, layout, condition, and history of a specific project site, as well as the capabilities, business goals, and proposed project design characteristics of a specific developer.
Assumptions
Project Densities and Characteristics
Per City direction, EPS has evaluated three different project densities, ranging from 50 dwelling units per acre (DUA) to 99 DUA to 130 DUA. At each density, the mix of market- rate units by bedroom count (i.e., the number of studios, one-bedrooms, etc.) was assumed to mirror the overall unit mix in projects built in San Mateo in the past five years.
Each of these densities can be achieved with wood-frame construction for the residential units at a residential height no greater than five stories, although the construction type for the ground floor and parking areas will differ among the densities. Buildings over five stories are usually not fully wood-frame and buildings over eight stories require concrete and steel construction, both of which will elevate construction costs. Projects greater than eight stories often become less financially feasible than lower-density or shorter buildings, and developers may even use State law to keep projects from reaching a certain height or density to maintain a cheaper or more feasible construction type.2 Thus, these building heights beyond five stories and their higher densities are not modeled in this analysis.
Projects with 50 DUA are assumed to have 100 percent above-ground parking, 99 DUA one-third above-ground parking and two-thirds basement parking, and 130 DUA one- third above-ground parking and two-thirds basement parking. With City guidance, EPS used parking ratios allowed under the SDBL to model all program and project types.
Additionally, it should be noted that areas of San Mateo will not have a minimum parking requirement with the adoption of AB 2097. AB 2097 prohibits public agencies from imposing or enforcing parking requirements on development projects located within a half mile of a major transit stop, and large areas of the city are located within a half mile of Caltrain stations. Still, it should be cautioned that lenders may require a certain amount of parking to finance a project.
2 San Jose to fight developers using 'builder's remedy' to downsize housing projects (mercurynews.com) Draft Memorandum: San Mateo Inclusionary Family Units
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Development Costs
Housing development cost categories include land acquisition, hard costs (e.g., construction labor and materials), indirect or "soft" costs (e.g., architecture, entitlement, marketing, financing costs, etc.) and other costs (e.g., developer fee, contingency).
To estimate hard costs for the Project, the analysis relied on a range of sources including real estate industry cost estimating reports and prior EPS experience in evaluating project feasibility. Table 2 below details the cost assumptions and estimated costs per unit for each project density. The development costs are reflective of a baseline project without any additional density that might be granted under SDBL.
Table 2 Development Costs Assumptions per Baseline Project Density Cost Assumptions Assumptions 50 DUA 99 DUA 130 DUA
Land Costs
Land Value (rounded) [11 $12,987,000 $12,987,000 $12,987,000 Land/Unit $259,740 $131,182 $99,900
Direct Costs
Direct Construction Costs PSF [2] $511 $511 $511
Direct Construction Costs/Unit (rounded) $594,200 $594,200 $594,200 Parking Construction/Space [3] $54,438 $68,648 $83,289
Parking Construction Cost/Unit $67,503 $84,597 $102,510 Subtotal, Direct Costs/Unit $661,703 $678,797 $696,710
Indirect and Other Costs
Indirect Costs/Unit (rounded) 20% of direct costs $132,300 $135,800 $139,300 Contingency 10% of indirect costs $13,230 $13,580 $13,930 Developer Fee 4% hard + soft costs $31,760 $32,584 $33,440 Total Project Cost $54,936,630 $98,202,294 $127,826,452 Total Cost/Unit $1.098,733 $991,942 $983,280
[3) Parking estimates are based on SDBL parking ratios.
Sources: Rider Levett Bucknall; and Economic & Planning Systems, Inc.
Revenues
The following section details revenue assumptions related to the residential units across project types. These assumptions were based on EPS market research in San Mateo and data provided by City staff.
Market Rate Residential Rents
For the market-rate rental units in each scenario, the analysis considers data from CoStar Group on rental multifamily apartments built in the San Mateo market since 2018. Based on the collected rent data, Table 3 illustrates these rental rates on a per-square-foot and per-unit basis.
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Table 3 San Mateo Monthly Market Residential Rents
Market Rents Avg. Rent/Sqft Avg. Rent/Unit
Market Rate Residential Rents (monthly)
Studio $4.80 $2,861
1-BR $4.11 $3,296
2-BR $3.71 $4,448
3-BR $4.15 $6,320
Sources: CoStar Group; and Economic & Planning Systems, Inc.
Affordable Residential Rental Rates
The City publishes an affordable housing schedule every year to establish the maximum rents, sale prices, and incomes for households occupying affordable housing units developed to comply with the City's Inclusionary Policy. These rates are derived from HCD and are also inclusive of utilities. Table 4 shows the 2022-2023 Very Low, and Lower income rates for affordable studios through three-bedroom units in the city.
Affordable rents for BMR units assume that households should spend no more than 30 percent of their gross annual income on total housing costs, which for rental units includes rent plus utilities.
Table 4 San Mateo Monthly Inclusionary Residential Rents, 2-22-23 Maximum Rents [1] Very Low Income [2] Lower Income [3]
Market Rate Residential Rents (monthly)
Studio $1,265 $1,508
1-BR $1,435 $1,728
2-BR $1,619 $1,947
3-BR $1,801 $2,165
[1] Maximum rents are inclusive of utility allowance.
12] Very low income units are dedicated to those making 50 percent of area median income where rent levels cannot exceed 30 percent of income.
[3] Lower income income units are dedicated to those making 80 percent of area median income where rent levels cannot exceed 30 percent of income.
Sources: City of San Mateo; and Economic & Planning Systems, Inc.
Comparing the market-rate rents on Table 3 to the affordable rents on Table 4, it is obvious that substantial discounts are required for BMR units, and that the discounts are deepest for larger units.
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Program Alternatives and Bonus Scenarios
EPS, with guidance from the City, modeled a multitude of inclusionary program alternatives at three different densities, with and without the application of State Density Bonus Law (SDBL). The four chosen inclusionary program alternatives are described below in Table 5, and were used to test a range of policy considerations in how the City could adapt its current Inclusionary Policy to augment the production of larger family- sized units and how those policy changes would impact overall project feasibility.
The Baseline program is representative of what is currently being produced in the city where 15 percent of units are BMR, BMR bedroom breakdown reflects the market rate unit breakdown. Alternative 1 conforms to the City's Inclusionary Policy option that states a developer can deliver as few as 10 percent of the project's total units as affordable as long as the BMR bedroom count equals at least 15 percent of total bedrooms in the project. Alternative 2 models an additional stipulation in the Inclusionary Policy that mandates one of every six BMR units (roughly 17 percent) be a three-bedroom unit while Alternative 3 mandates one of every five BMR units (20 percent) be a three-bedroom unit.
Table 5 Descriptions of IHO Program Alternatives
Program BMR Unit Currently
Alternative Description Percentage Permitted?
Baseline Follows typical IHO where 15% of 15% Yes
units are BMR; both BMR and market
units reflect the recent market
production
Alternative 1 Alternative measure that allows fewer 10% Yes BMR units as long as BMR bedroom
count is at least 15 percent of total
bedrooms; market units reflect the
market
Alternative 2 Standard IHO with new stipulation that 15% No 1/6 of BMR units are 3-BR units;
market units reflect the market
Alternative 3 Standard IHO with new stipulation that 15% No 1/5 of BMR units are 3-BR units;
market units reflect the market
Sources: Economic & Planning Systems, Inc.
Feasibility Results
Feasibility results across all modeled programs and densities are shown below in Figure
7. In general, the feasibility is enhanced in scenarios where the developer is assumed to Memorandum: San Mateo Inclusionary Family Units
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take advantage of the SDBL allowing them to build more market-rate units in excess of the underlying zoning.
Interestingly, the most feasible option for each density both with and without the SDBL applied appears to be the City's existing option allowing developers to provide as few as 10 percent BMR units as long as they provide at least 15 percent BMR bedrooms. This outcome could be achieved by a developer providing 10 three-bedroom units rather than 15 two-bedroom units, and thus would have the effect of promoting larger units.
However, EPS understands that no developer has yet opted for this alternative, perhaps because SDBL grants bonuses based on the proportion of affordable units rather than the proportion of affordable bedrooms.
Alternatives 2 and 3, in which a set proportion of BMR units would be required to be three-bedroom units, appear to reduce the yield-on-cost by one to three basis points relative to the Baseline reflecting the City's current Inclusionary Policy (3.19 percent and
3.17 percent has a difference of two basis points). Such a difference indicates there is only a marginal impact on requiring one out of five or six BMR units as three-bedroom units.
However, projects in all scenarios reveal low yield-on-cost figures suggesting developers could face financial challenges. This is likely a combination and compounding of several factors including high construction costs, high interest rates, high land prices, and modest increases in rents. A yield-on-cost of 5.5 percent or greater would illustrate a more suitable environment indicative of stronger financial performance.
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Figure 7 Overall Feasibility Results
4.00%
3.50%
3.00%
2.50%
Yield-on-Cost Percentage 2.00%
1.50%
1.00%
0.50%
0.00%
Scenario A, No Scenario B, Scenario A, No Scenario B, Scenario A, No Scenario B, SDBL Standard SDBL SDBL Standard SDBL SDBL Standard SDBL 50 DUA 99 DUA 130 DUA
• Baseline N• Alternative 1 •Alternative 2• Alternative 3 Source: CoStar Group, Economic & Planning Systems, Inc.
Results with No State Density Bonus Units
Results for 50, 99, and 130 DUA projects that do not produce additional market-rate units under SDBL are illustrated below in Table 6, Table 7, and Table 8, respectively.
As a whole, the yield-on-cost marginally changes by a few basis points depending on which IHO alternative is applied. Feasibility does not change between Baseline and Alternative 2 and Alternative 3 by more than one-two basis points, leading EPS to conclude that an additional three-bedroom requirement does not have a material impact on project feasibility. Alternative 1 with only 10 percent BMR units but 15 percent BMR bedrooms performs the best within each density. As DUA increases, the yield-on-cost metric does not increase in a linear fashion with higher densities performing better. This is a result of construction costs changing from more underground parking needed for denser project types.
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Table 6 Results at 50 DUA without SDBL Bonus Units
Unit Mixture Baseline, 15% BMR Alternate 1, 10% Alternate 2, 15% Alternate 3, 15% BMR BMR, 1/6 3-BR Units BMR, 1/5 3-BR Units
Total Units 50 50 50 50
Cost Assumptions
Land/Unit $259,740 $259,740 $259,740 $259,740
Direct Cost/Unit $661,703 $679,491 $665,703 $667,303
Indirect Costs/Unit $132,300 $135,900 $133,100 $133,500 Other Costs $44,990 $46,206 $45,262 $45,382
Total Project Cost $54,936,630 $56,066,845 $55,190,230 $55,296,230 Total Cost/Unit $1,098,733 $1,121,337 $1,103,805 $1,105,925 Project Value
AR Revenue per Yea $2,003,305 $2,121,146 $2,003,305 S2,003,305 Affordable Revenue per Year I' $163,978 $120,738 $166,886 $168,005 Operating Costs ($600,000) ($600,000) ($600,000) ($600,000) Nol Pet Untrating Incomo (NO) $1,567,283 $1,641,884 $1,570,191 $1,571,310 $31,346 $32,838 $31,404 $31,426
Yield on Cost 12] 2.85% 2,93% 2.85% 2,84%
Sources: City of San Mateo; CoStar; Rider Leveft Bucknall Economic & Planning Systems, Inc.
Table 7 Results at 99 DUA without SDBL Bonus Units
Unit Mixture Baseline, 15% BMR Alternate 1, 10% Alternate 2, 15% Alternate 3, 15% BMR BMR, 1/6 3-BR Units BMR, 1/5 3-BR Units
Total Units 99 99 99 99
Cost Assumptions
Land/Unit $131,182 $131,182 $131,182 $131,182
Direct Cost/Unit $678,797 $696,884 $682,797 $684,397
Indirect Costs/Unit $135,800 $139,400 $136,600 $136,900 Other Costs $46,164 $47,391 $46,436 $46,542
Total Project Cost $98,202,294 $100,470,810 $98,704,422 $98,903,016 Total Cost/Unit $991,942 $1,014,857 $997,014 $999,020
Project Value
MR Revenue per Year $3,966,544 S4,199,870 $3,966,544 $3,966,544 Affordable Revenue per Year [1] $324,677 $239,061 $330,435 $332,650 Operating Costs ($1,188,000) ($1,188,000) ($1,188,000) ($1,188,000) Total Net Operating Income (NOI) $3,103,221 $3,250,931 $3,108,979 $3,111,193 NOI Per Unit $31,346 $32,838 $31,404 $31,426
Yield on Cost [2] 3.16% 3.24% 3.15% 3.15%
[1] Affordable revenue includes rent and utilities per the City's BMR Housing Program maximum unit rates 12] Yield on cost is calculated as NOI divided by total development costs, and is a typical return metric used for rental real estate projects.
Sources: City of San Mateo; CoStar; Rider Levett
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Table 8 Results at 130 DUA without SDBL Bonus Units
Unit Mixture Baseline, 15% BMR Alternate 1, 10% Alternate 2, 15% Alternate 3, 15% BMR, 1/6 3-BR Units BMR, 1/5 3-BR Units
Total Units 130 130 130 130
Cost Assumption:
Land/Unit $99,900 $99,900 $99,900 $99,900
Direct Cost/Unit $696,710 $715,332 $700,710 $702,951
Indirect Costs/Unit $139,300 $143,100 $140,100 $140,600 Other Costs $47,370 $48,647 $47,642 $47,802
Total Project Cost $127,826,452 $130,907,315 $128,485,812 $128,862,853 Total Cost/Unit $983,280 $1,006,979 $988,352 $991,253
Project Value
MR Revenue per Year $5,208,593 $5,514,981 $5,208,593 $5,208,593 Affordable Revenue per Year [1] $426,343 $313,919 $433,905 $436,813 Operating Costs ($1,560,000) ($1,560,000) ($1,560,000) ($1,560,000) Total Net Operating Income (NOI) $4,074,936 $4,268,899 $4,082,497 $4,085,406 NOI Per Unit $31,346 $32,838 $31,404 $31,426
Yield on Cost [2] 3.19% 3.26% 3.18% 3.17%
1 to dan orels cacided a no adult per helper ols an as an aim at as or real ed state.
Sources: City of San Mateo; CoStar; Rider Levett
Results With State Density Bonus Units
The addition of extra units per the SDBL results in improved feasibility for the 50, 99, and 130 DUA projects, as illustrated below in Table 9, Table 10, and Table 11, respectively.
Projects with added density bonus units generally perform better by about 20 basis points compared to those without the bonus units when comparing across densities and the same project type. Proportionally, project types are relatively similar. Alternative 2 and Alternative 3 have no significant difference when compared to the Baseline. Again, Alternative 1, which uses the City's existing alternative inclusionary requirement, achieves the best yield-on-cost across all densities. Projects modeled at 99 DUA are the highest across each modeled density. Again, this is a result of raising parking costs as projects increase DUA and need more basement parking.
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Table 9 Results at 50 DUA with SDBL Bonus Units
Unit Mixture Baseline, 15% BMR Alternate 1,10% Alternate 2,15% Alternate 3, 15% BMR BMR, 1/6 3-BR Units BMR, 1/5 3-BR Units
Total Units 64 64 64 64
Cost Assumptions
Land/Unit $202,922 $202,922 $202,922 $202,922
Direct Cost/Unit $644,236 $658,087 $647,336 $648,536
Indirect Costs/Unit $128,800 $131,600 $129,500 $129,700 Other Costs $43,801 $44,747 $44,023 $44,099
Total Project Cost $65,264,618 $66,390,801 $65,522,026 $65,616,490 Total Cost/Unit $1,019,760 $1,037,356 $1,023,782 $1,025,258 Project Value
MR Revenue per Year $2,003,305 $2,121,146 $2,003,305 $2,003,305 Affordable Revenue per Year [1] $163,978 $120,738 $166,886 $168,005 SDBL Unit Revenue per Year $648,730 $648,730 $648,730 $648,730 Operating Costs ($768,000) ($768,000) ($768,000) ($768,000) $2,048,013 $2,122,614 $2,050,921 $2,052,040
Total Pet Uperating Income (NO) $32,000 $33,166 $32,046 $32,063 Yield on Cost 121 3.14% 3.20% 3.13% 3.13%
J Affordable revenue includes rent and utilities per the City's BMR Housing Program maximum unit rate ] Yield on cost is calculated as NOI divided by total development costs, and is a typical return metric used for rental real estate projec Sources: City of San Mateo; CoStar; Rider Levett Bucknall Economic & Planning Systems, Inc.
Table 10 Results at 99 DUA with SDBL Bonus Units
Unit Mixture Baseline, 15% BMR Alternate 1, 10% Alternate 2, 15% Alternate 3, 15% BMR BMR, 1/6 3-BR Units BMR, 1/5 3-BR Units
Total Units 126 126 126 126
Cost Assumptions
Land/Unit $103,071 $103,071 $103,071 $103,071
Direct Cost/Unit $659,669 $673,858 $662,769 $664,069
Indirect Costs/Unit $131,900 $134,800 $132,600 $132,800 Other Costs $44,853 $45,826 $45,075 $45,155
Total Project Cost $118,376,118 $120,652,086 $118,882,890 $119,081,970 Total Cost/Unit $939,493 $957,556 $943,515 $945,095
Project Value
MR Revenue per Year $3,966,544 S4,199,870 $3,966,544 $3,966,544 Affordable Revenue per Year [1] $324,677 $239,061 $330,435 $332,650 SDBL Unit Revenue per Year $1,263,130 $1,263,130 $1,263,130 $1,263,130 Operating Costs ($1,512,000) ($1,512,000) ($1,512,000) ($1,512,000) Total Net Operating Income (NOI) $4,042,351 $4,190,061 $4,048,109 $4,050,324 NOI Per Unit $32,082 $33,254 $32,128 $32,145
Yield on Cost [2] 3.41% 3.47% 3.41% 3.40%
[1] Affordable revenue includes rent and utilities per the City's BMR Housing Program maximum unit rates [2] Yield on cost is calculated as NOI divided by total development costs, and is a typical return metric used for rental real estate projects.
Sources: City of San Mateo; CoStar; Rider Levett
Draft Memorandum: San Mateo Inclusionary Family Units
Page | 19
Table 11 Results at 130 DUA with SDBL Bonus Units
Unit Mixture Baseline, 15% BMR Alternate 1, 10% Alternate 2, 15% Alternate 3, 15% BMR, 1/6 3-BR Units BMR, 1/5 3-BR Units
Total Units 166 166 166 166
Cost Assumptions
Land/Unit $78,235 $78,235 $78,235 $78,235
Direct Cost/Unit $675,179 $689,784 $678,379 $680,081
Indirect Costs/Unit $135,000 $138,000 $135,700 $136,000 Other Costs $45,907 $46,911 $46,133 $46,243
Total Project Cost $155,097,288 $158,186,455 $155,782,204 $156,132,765 Total Cost/Unit $934,321 $952,930 $938,447 $940,559
Project Value
MR Revenue per Year $5,208,593 $5,514,981 $5,208,593 $5,208,593 Affordable Revenue per Year [11 $426,343 $313,919 $433,905 $436,813 SDBL Unit Revenue per Year $1,705,487 $1,705,487 $1,705,487 $1,705,487 Operating Costs ($1,992,000) ($1,992,000) ($1,992,000) ($1,992,000) Total Net Operating Income (NOI) $5,348,423 $5,542,386 $5,355,984 $5,358,893 NOI Per Unit $32,219 $33,388 $32,265 $32,282
Yield on Cost [2] 3.45% 3.50% 3.44% 3.43%
[1] Affordable revenue includes rent and utilities per the City's BMR Housing Program maximum unit rates 12] Yield on cost is calculated as NOI divided by total development costs, and is a typical return metric used for rental real estate Sources: City of San Mateo; CoStar; Rider Levett