HYBRID MEETING
www.Cityofvallejo.net
CALL AND NOTICE OF SPECIAL
MEETING AT 5:00 PM OF THE
VALLEJO CITY COUNCIL & PLANNING
COMMISSION
JULY 7, 2025
Vallejo Room (Lower JFK Library)
505 Santa Clara Street
Vallejo, CA 94590
COUNCIL MEMBERS
City Council
Andrea Sorce (Mayor)
Peter Bregenzer (Vice-Mayor)
Helen-Marie Gordon
Tonia Lediju, PhD
Alexander Matias
Diosdado "JR" Matulac
Charles Palmares
PLANNING COMMISSION
Eric Blind, (Chair)
Anthony Taylor, (Vice-Chair)
Donald Douglass
Wanda Madeiros
Tara Beasley-Stansberry
Phillip Balbuena
Craig Standafer
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Any supplemental writing related to an agenda item for an open session of a regular meeting that is distributed to all or a majority of all members of the City Council less than 72 hours before the meeting will be posted concurrently on the City’s website at www.cityofvallejo.net/agendas Written material distributed during the meeting, will be available at the meeting if prepared by the City or after the meeting if prepared by someone else. Such materials may be obtained from the City Clerk
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TO THE MEMBERS OF THE VALLEJO CITY COUNCIL & THE VALLEJO PLANNING COMMISSION:
You are hereby notified that I do call the Vallejo City Council and the Vallejo Planning Commission in special session to consider only the matters stated on the agenda listed below.
NOTICE: Members of the public shall have the opportunity to address the City Council and Planning Commission concerning any item on the agenda before or during consideration of that item. No other items may be discussed at this special meeting.
1. CALL TO ORDER
2. ROLL CALL
3. PLEDGE OF ALLEGIANCE
4. JOINT WORKSHOP
A. RECEIVE A PRESENTATION AND PROVIDE DIRECTION REGARDING THE
PRELIMINARY FINDINGS OF THE INCLUSIONARY ZONING FEASIBILITY
STUDY AND COMMERCIAL LINKAGE FEE NEXUS STUDY
Recommendation: Receive a presentation and provide direction regarding the preliminary findings of the Inclusionary Zoning Feasibility Study and Commercial Linkage Fee Nexus Study.
Contact: Kristin Pollot, AICP, Planning & Development Services Director, (707) 648-4326
[email protected]
5. ADJOURNMENT
ADDITIONAL CITY INFORMATION
Members of the public can:
•Like us on Facebook and Instagram ( @cityofvallejo)
•Sign up to receive City Communications via e-mail ( www.cityofvallejo.net/subscribe) •Sign up for emergency alerts at: alertsolano.com
Dated: Tuesday, July 1, 2025
Andrea Sorce, Mayor
I, Dawn Abrahamson, City Clerk do hereby certify that I have caused a true copy of the above notice and agenda to be delivered to City Council
Andrea Sorce (Mayor)
Peter Bregenzer (Vice-Mayor)
Helen-Marie Gordon
Tonia Lediju, PhD
Alexander Matias
Diosdado "JR" Matulac
Charles Palmares
PLANNING COMMISSION
Eric Blind, (Chair)
Anthony Taylor, (Vice-Chair)
Donald Douglass
Wanda Madeiros
Tara Beasley-Stansberry
Phillip Balbuena
Craig Standafer,
at the time and in the manner prescribed by law and that this agenda was posted at City Hall, 555 Santa Clara Street, CA at 2:45 p.m., Tuesday, July 1, 2025.
Dated: Tuesday, July 1, 2025
ACTION ITEM 4.A.
DATE: July 7, 2025
TO: Mayor and Members of the City Council
FROM: Kristin Pollot, AICP, Planning and Development Services Director Hector Rojas, Long Range Planning Manager
SUBJECT: RECEIVE A PRESENTATION AND PROVIDE DIRECTION REGARDING THE
PRELIMINARY FINDINGS OF THE INCLUSIONARY ZONING FEASIBILITY STUDY AND
COMMERCIAL LINKAGE FEE NEXUS STUDY
RECOMMENDATION
Receive a presentation and provide direction regarding the preliminary findings of the Inclusionary Zoning Feasibility Study and Commercial Linkage Fee Nexus Study.
REASONS FOR RECOMMENDATION
Programs B 2.1.1 and B 2.1.2 of the City’s 6th Cycle Housing Element (2023–2031), adopted in December 2024, direct staff to explore adoption of an Inclusionary Housing Ordinance and a Commercial Linkage Fee.
These programs are intended to help Vallejo meet its Regional Housing Needs Allocation (RHNA) and expand affordable housing opportunities for low- and moderate-income households.
To implement these Housing Element programs, the City contracted with Economic & Planning Systems, Inc. (EPS) in August 2023 to prepare a feasibility study for inclusionary zoning and a nexus study for commercial linkage fees. EPS has completed preliminary analyses and will present its findings during the July 7 joint meeting.
This study session provides an opportunity for the City Council and Planning Commission to receive a presentation on the preliminary results, discuss potential policy options, and provide direction on whether to proceed with the development of one or both programs. This input will guide staff and consultants as they refine recommendations and determine appropriate next steps.
BACKGROUND AND DISCUSSION
Inclusionary housing ordinances require residential developers to include a percentage of units as affordable to low- and moderate-income households or, alternatively, to pay in-lieu fees that support affordable housing production. These ordinances have been used widely across the state to promote mixed-income communities and to expand the supply of affordable housing. Program B 2.1.1 of the Housing Element directs the City to seek developer input and conduct a nexus study prior to drafting an inclusionary housing ordinance for Council consideration by the third quarter of 2025.
Commercial linkage fees are fees exacted from developers to mitigate the housing impacts generated from new commercial projects. Fee revenues are used to subsidize affordable housing development for the local workforce. Program B 2.1.2 of the Housing Element requires the City to evaluate and consider a commercial linkage fee nexus analysis by the third quarter of 2025.
To fulfill these obligations, the City retained Economic & Planning Systems, Inc. (EPS) to conduct an inclusionary zoning feasibility study and a commercial linkage fee nexus study. EPS is a land use economics consulting firm with extensive experience preparing feasibility and nexus studies for jurisdictions across
Date: July 7, 2025
Subject: RECEIVE A PRESENTATION AND PROVIDE DIRECTION REGARDING THE
PRELIMINARY FINDINGS OF THE INCLUSIONARY ZONING FEASIBILITY STUDY
AND COMMERCIAL LINKAGE FEE NEXUS STUDY
California. The City's contract with EPS is for a not-to-exceed amount of $86,196, and it expires on September 11, 2025. The existing scope of work includes:
• A feasibility study for an inclusionary housing ordinance, including market analysis, peer city policy review, development prototype testing, and financial modeling of inclusionary requirements and in-lieu fee options.
• A nexus study for a potential commercial linkage fee, compliant with Assembly Bill (AB) 602, to quantify the relationship between nonresidential development and the need for affordable housing. • Stakeholder engagement with developers, business representatives, and housing advocates. • Presentation of findings and policy considerations to the City.
During this meeting, EPS will present its preliminary findings (a draft of the presentation is attached to this staff report). The presentation will provide an overview of the scope, methodology, and preliminary results of both studies, including:
• Key challenges facing residential and commercial development in Vallejo. • Findings on what levels of inclusionary requirements and in-lieu fees may be financially feasible under current market conditions.
• Nexus-supported commercial linkage fee levels and policy options for implementation. • Peer city comparisons for both policy types.
Staff is requesting input from the City Council and Planning Commission on whether to proceed with drafting an inclusionary housing ordinance and/or a commercial linkage fee program, and if so, which policy elements to prioritize. Options include: 1) moving forward with drafting, adoption, and enforcement of ordinances; 2) drafting and adoption of ordinances but deferring enforcement until market conditions improve; or 3) choosing not to pursue the policies at this time.
FISCAL IMPACT
There is no immediate fiscal impact associated with this item. The purpose of this study session is to receive a presentation and provide policy direction on the preliminary study findings. Depending on the direction provided by the City Council and Planning Commission, staff may evaluate potential fiscal impacts associated with the development, implementation, and administration of one or both programs. Any future fiscal implications will be analyzed and presented as part of subsequent policy development or ordinance adoption processes.
ENVIRONMENTAL REVIEW
The requested action is not considered a project under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section 15378, as it would not result in a direct or reasonably foreseeable indirect physical change in the environment. Therefore, it is not subject to environmental review.
ATTACHMENTS
1. Presentation Slides
CONTACT
Date: July 7, 2025
Subject: RECEIVE A PRESENTATION AND PROVIDE DIRECTION REGARDING THE
PRELIMINARY FINDINGS OF THE INCLUSIONARY ZONING FEASIBILITY STUDY
AND COMMERCIAL LINKAGE FEE NEXUS STUDY
Kristin Pollot, AICP, Planning & Development Services Director, (707) 648-4326 [email protected]
Economic & Planning Systems, Inc.
The Economics of Land Use
1330 Broadway, Suite 450 Oakland, CA 94612
510.841.9190 www.epsys.com
INCLUSIONARY HOUSING
PROGRAM AND
COMMERCIAL LINKAGE FEE
NEXUS STUDY
City Council & Planning
Commission Study Session
City of Vallejo
July 7, 2025
Economic & Planning Systems EPS PPT Presentation | 2
BACKGROUND & OBJECTIVES
Vallejo Housing Element
(2023-2031) instructs City
staff to explore Inclusionary
Housing and Commercial
Linkage Fees as methods
towards meeting RHNA goals.
– Program B 2.1.1: Inclusionary
Housing Ordinance
– Program B 2.1.2: Commercial
Linkage Fees
Analysis with EPS began in
August 2023. Staff to
review by Q3 2025.
Economic & Planning Systems EPS PPT Presentation | 3
INCLUSIONARY HOUSING ORDINANCE
Why adopt inclusionary housing?
– Increase affordable housing units alongside overall residential supply
– Promote equity by providing housing opportunities across a range of income levels
– Helps to meet the City’s RHNA requirements
– Increases eligibility for One Bay Area Grant programs An inclusionary housing ordinance requires a residential developer to provide a percentage of units below market-rate rents or pay in-lieu fees (or other alternatives) towards an affordable housing fund.
Economic & Planning Systems EPS PPT Presentation | 4
COMMERCIAL LINKAGE FEE
Why adopt commercial linkage fees?
– New non-residential development brings in new workers and generates demand for local housing
– Provide local housing for workforce and reduce commute times in and out of Vallejo
– Promote equity by providing housing opportunities across a range of income levels
– Helps to meet the City’s RHNA requirements
– Increases eligibility for One Bay Area Grant programs Commercial linkage fees require developers of non-residential projects to pay fees that fund local affordable housing production.
Economic & Planning Systems EPS PPT Presentation | 5
MEETING RHNA WITH AFFORDABLE HOUSING PROGRAMS
Very Low
Low
Moderate
Above Moderate
Inclusionary
Housing
Ordinance
Income LimitsProgram
Economic & Planning Systems EPS PPT Presentation | 6
MEETING RHNA WITH AFFORDABLE HOUSING PROGRAMS
Very Low
Low
Moderate
Above Moderate
Inclusionary
Housing
Ordinance
Income LimitsProgram
Market rate units
Economic & Planning Systems EPS PPT Presentation | 7
MEETING RHNA WITH AFFORDABLE HOUSING PROGRAMS
Very Low
Low
Moderate
Above Moderate
Builds BMR units
Market rate units
Inclusionary
Housing
Ordinance
Income LimitsProgram
or collects in-lieu fee
Economic & Planning Systems EPS PPT Presentation | 8
MEETING RHNA WITH AFFORDABLE HOUSING PROGRAMS
Very Low
Low
Moderate
Above Moderate
Generates fee revenue
City can leverage
Commercial
Linkage
Fee
Income LimitsProgram
INCLUSIONARY HOUSING ORDINANCE
Economic & Planning Systems EPS PPT Presentation | 10
DO INCLUSIONARY REQUIREMENTS IMPACT FEASIBILITY?
Short answer: Yes.
– Inclusionary units must be sold or leased below market value but cost the same to construct as the market-rate portion.
– Reduces the developer profit or net operating income received. Other factors affecting feasibility (i.e., whether project can be built):
– Land costs
– Construction costs
– City requirements (e.g., impact fees, entitlement process) – Density allowances
– Achievable rents or sale prices
An inclusionary housing feasibility analysis aims to identify the level of inclusionary that the project can bear and remain feasible, given local market values and current development costs.
Economic & Planning Systems EPS PPT Presentation | 11
INCLUSIONARY HOUSING RESEARCH QUESTIONS
Question EPS Task
1. What is happening in Vallejo’s
local housing market?
Conduct analysis of local market
and economic conditions.
2. What are other cities doing for
their inclusionary policies?
Survey of policies in comparable
jurisdictions
3. How is feasibility affected by
other city requirements on
development?
Evaluate Vallejo’s current impact
fees against peer jurisdictions
4. Can current projects
accommodate inclusionary
requirements and remain feasible?
Assess the feasibility of
inclusionary housing requirements
given current housing market
conditions
Economic & Planning Systems EPS PPT Presentation | 12
AFFORDABLE RENTS VS. VALLEJO’S RENTS
A look at the current housing market comparing Average Median Income (AMI) and market-rate rents.
Market rents in Vallejo are affordable to some households at the median income level for some household sizes but may become unaffordable at lower income categories.
Household
Size
Median Income [1]
100% AMI
Affordable Monthly
Rent at 100% AMI [2]
Number of
Bedrooms [3]
Vallejo Monthly
Market Rent [4]
AMI Level of
Affordability
1 $79,250 $1,981 0 (studio) $1,459 74%
2 $90,550 $2,264 1 $1,598 71%
3 $101,900 $2,548 2 $1,976 78%
4 $113,200 $2,830 3 $2,619 93%
5 $122,250 $3,056 4 $3,105 102%
[1] Based on HCD Income Limits for Solano County (2024) [2] Assumes 30 percent of income is spent on housing.
[3] Consistent w ith guidance in State law (Health and Safety Code Section 50052.5) on bedroom occupancy levels. [4] Estimated from average reported rents by bedroom size from Zillow , Zumper, and Costar in April 2025.
Source: Economic & Planning Systems
Economic & Planning Systems EPS PPT Presentation | 13
VALLEJO RENTS ARE MODEST COMPARED TO COUNTY & BAY AREA
Vallejo
$2.21
Bay Area
$3.36
Rest of Solano County
$2.32
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00Rents per Sq. Ft.
Multifamily Rents per Square Foot, 2000 to pres.
Vallejo Bay Area Rest of Solano County
Source: CoStar (2025)
Economic & Planning Systems EPS PPT Presentation | 14
VALLEJO’S MARKET SHARE HAS DIMINISHED GREATLY
Sources: City of Vallejo, HUD SOCDS
0 500
1,000
1,500
2,000
2,500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Number of Units
Single Family Units Permitted
Single Family Units and ADUs permitted (City of Vallejo) Rest of Solano County (from SOCDS)
Economic & Planning Systems EPS PPT Presentation | 15
VALLEJO’S MARKET SHARE HAS DIMINISHED GREATLY
0 100
200
300
400
500
600
700
800
900
1,000Number of Units
Multifamily Units Under Construction
Vallejo (CoStar) Rest of Solano County (CoStar)
Source: CoStar
Economic & Planning Systems EPS PPT Presentation | 16
CITY’S RECENT PERMITTING HAS EXCEEDED UNIT DELIVERIES
0 50
100
150
200
250
2015 2016 2017 2018 2019 2020 2021 2022 2023
Number of Units
Comparison of Residential Permit Data from City and HUD, 2015 to 2023 City of Vallejo SOCDS
Economic & Planning Systems EPS PPT Presentation | 17
CONSTRUCTION COSTS HAVE RISEN FASTER THAN RENTS
2.07 1.76
0.96 0.00
0.50 1.00
1.50 2.00
2.50Cost Index
Index of Construction Costs, Multifamily Rents, Mortgage Rates, 2000-2024 Construction Cost Index (ENR) Vallejo Avg. Multifamily Rent per Sq. Ft. (Costar) Avg. 30-Year Fixed Rate Mortgage (FRED)
Economic & Planning Systems EPS PPT Presentation | 18
5%
7.50%
6%
5%
7.50%
12%
6%
10% 10%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Benicia Concord El Cerrito Hayward Oakland* Richmond
For-Sale Inclusionary Requirements in Peer Cities
Low Moderate
INCLUSIONARY REQUIREMENTS IN OTHER CITIES
Ownership requirement ranges from 10 to 15 percent.
Currently, Benicia is the only Solano County city with an inclusionary requirement.
OWNERSHIP
*Oakland has affordable housing impact fee requirements and presents an on-site affordable housing option as alternative.
No requirements: Solano County,
Dixon, Rio Vista, Suisun City,
Vacaville, Antioch, Martinez
In progress: Fairfield
Economic & Planning Systems EPS PPT Presentation | 19
1%
5%
1%
5%
3%
5%
4%
5%
3%
10% 10%
0%
2%
4%
6%
8%
10%
12%
14%
Benicia Concord El Cerrito Hayward Oakland* Richmond
Rental Inclusionary Requirements in Peer Cities
Very Low Low Moderate
INCLUSIONARY COMPARISON TO OTHER CITIES
Rental requirement ranges from 6 to 10 percent.
Currently, Benicia is the only Solano County city with an inclusionary requirement.
RENTAL
*Oakland has affordable housing impact fee requirements and presents an on-site affordable housing option as alternative.
No requirements: Solano County,
Dixon, Rio Vista, Suisun City,
Vacaville, Antioch, Martinez
In progress: Fairfield
Economic & Planning Systems EPS PPT Presentation | 20
VALLEJO’S IMPACT FEES ARE AT OR BELOW THOSE IN SIMILAR CITIES Fees per unit for prototype single-family detached unit, includes city, county, school district, utility district fees.
Housing fees make up 25 to 41 percent of total impact fees among cities that have them.
SINGLE-FAMILY DETACHED
$68,813
$87,681
$105,669
$69,709
$113,869
$0.00
$20,000.00
$40,000.00
$60,000.00
$80,000.00
$100,000.00
$120,000.00
Vallejo Fairfield Richmond Santa Rosa Hayward
City Special District County School District
Housing
In-Lieu
Fees:
$26,400
Housing
Impact
Fees:
$22,400
Housing
In-Lieu
Fees:
$46,746
Economic & Planning Systems EPS PPT Presentation | 21
VALLEJO’S IMPACT FEES ARE AT OR BELOW THOSE IN SIMILAR CITIES Fees per unit for prototype single-family detached unit, includes city, county, school district, utility district fees.
Housing fees make up 19 to 44 percent of total impact fees among cities that have them.
MULTIFAMILY
$41,754
$53,111
$56,412
$44,624
$50,368
$0.00
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$50,000.00
$60,000.00
Vallejo Fairfield Richmond Santa Rosa Hayward
City Special District County School District
Housing
In-Lieu
Fees:
$10,800
Housing
Impact
Fees:
$12,000
Housing
In-Lieu
Fees:
$22,268
Economic & Planning Systems EPS PPT Presentation | 22
FEASIBILITY MODEL METHODOLOGY
Develop prototype housing
products
Calculate development costs,
affordability, market value
Verify assumptions with
developers
Compare costs & market value
for feasibility
If feasible, test inclusionary
against profit or NOI
Representing housing types being
built or planned for in Vallejo
Costs include land, construction,
fees, profit. Affordability at varying
income levels assumes 30% of
income is spent on housing. Market
value estimate is for-sale price or net
operating income.
For feasibility, market value >
developer costs (incl. profit)
Assume minimum 15% profit margin
(for-sale) or 7% yield-on-cost
(rental)
Economic & Planning Systems EPS PPT Presentation | 23
DEVELOPMENT PROTOTYPES
USED FOR ESTIMATING AFFORDABLE HOUSING SUBSIDIES
Five development prototypes represent the types of residential projects that may occur in Vallejo.
Category Bedrooms Unit Size (ft2) Tenure Density
Single-Family
Detached 4 2,200 For Sale 8 units/acre
Single-Family
Small Lot 3 1,600 For Sale 15 units/acre
Multifamily
Condominium 2 1,200 For Sale 30 units/acre
Low Density
Multifamily 2 950 Rental 30 units/acre
High Density
Multifamily 2 950 Rental 65 units/acre
Economic & Planning Systems EPS PPT Presentation | 24
$127,600 $147,300
$276,800
$326,500
$371,300
$416,000
$663,514 $643,814
$514,314
$464,614
$419,814
$375,114
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Very Low
Income
(50% AMI)
Lower
Income
(60% AMI)
Low
Income
(80% AMI)
Median
Income
(100% AMI)
Moderate
Income
(110% AMI)
Moderate
Income
(120% AMI)
Subsidy for Single-Family Detached (8 units/acre)
Supportable Home Price Affordability Gap
INCLUSIONARY HOUSING – GAP ANALYSIS
SINGLE-FAMILY DETACHED
The cost of development aligns with the current market value for Single-family Detached housing, suggesting that the project is just barely feasible.
Est.
market
value
Economic & Planning Systems EPS PPT Presentation | 25
INCLUSIONARY HOUSING – GAP ANALYSIS
SINGLE-FAMILY SMALL LOT DETACHED
The cost of development exceeds the current market value for Single-family Small Lot Detached housing and cannot accommodate inclusionary. $120,900 $139,300
$259,200
$305,200
$346,600
$388,100
$505,620 $487,220
$367,320
$321,320
$279,920
$238,420
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Very Low
Income
(50% AMI)
Lower
Income
(60% AMI)
Low
Income
(80% AMI)
Median
Income
(100% AMI)
Moderate
Income
(110% AMI)
Moderate
Income
(120% AMI)
Subsidy for Small Lot Single Family (15 units/acre)
Supportable Home Price Affordability Gap
Est.
market
value
Economic & Planning Systems EPS PPT Presentation | 26
INCLUSIONARY HOUSING – GAP ANALYSIS
MULTIFAMILY ATTACHED CONDO
The cost of development exceeds the current market value for condominiums and cannot accommodate inclusionary.
$108,700 $125,200
$232,900
$274,500 $311,800 $349,000
$620,875 $604,375
$496,675
$455,075 $417,775 $380,575
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
Very Low
Income
(50% AMI)
Lower
Income
(60% AMI)
Low
Income
(80% AMI)
Median
Income
(100% AMI)
Moderate
Income
(110% AMI)
Moderate
Income
(120% AMI)
Gap Analysis for Multifamily Attached Condo (30 units/acre) Supportable Home Price Affordability Gap
Est.
market
value
Economic & Planning Systems EPS PPT Presentation | 27
INCLUSIONARY HOUSING – GAP ANALYSIS
LOW-DENSITY MULTIFAMILY RENTAL
The cost of development exceeds the current market value for low-density multifamily and cannot accommodate inclusionary.
$88,383 $110,833
$257,883 $272,967
$323,917
$374,717
$411,930 $389,480
$242,430 $227,347
$176,397
$125,597
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
Very Low
Income
(50% AMI)
Lower
Income
(60% AMI)
Low
Income
(80% AMI)
Median
Income
(100% AMI)
Moderate
Income
(110% AMI)
Moderate
Income
(120% AMI)
Subsidy for Low Density Multi-family Rental (30 units/acre) Total Supportable Unit Values Affordability Gap
Est.
market
value
Economic & Planning Systems EPS PPT Presentation | 28
INCLUSIONARY HOUSING – GAP ANALYSIS
HIGHER-DENSITY MULTIFAMILY RENTAL
The cost of development exceeds the current market value for high-density multifamily and cannot accommodate inclusionary.
$88,383 $110,833
$257,883 $272,967
$323,917
$374,717
$441,504 $419,054
$272,004 $256,920
$205,970
$155,170
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
Very Low
Income
(50% AMI)
Lower
Income
(60% AMI)
Low
Income
(80% AMI)
Median
Income
(100% AMI)
Moderate
Income
(110% AMI)
Moderate
Income
(120% AMI)
Subsidy for High Density Multi-family Rental (65 units/acre) Total Supportable Unit Values Affordability Gap
Est.
market
value
Economic & Planning Systems EPS PPT Presentation | 29
MARKET RATE FEASIBILITY
AS OF JUNE 2025
A comparison of the total development cost (blue) to the yield-on- cost or estimated sale price (brown) of prototype projects without any affordability requirements, based on current assumptions. $791,114
$626,520
$733,025
$500,313
$529,887
$792,000
$576,000
$402,831 $414,733 $414,733
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
Single Family Detached Small Lot Single Family
Detached
Multifamily Attached Condo Baseline Density Multifamily Apartment
Higher Density Multifamily
Apartment
Development Costs Avg. Sale Price or Capitalized Value
Economic & Planning Systems EPS PPT Presentation | 30
CONCLUSION & KEY FINDINGS
Current development costs are high, such that market
values are insufficient to generate profit for most projects and feasibility becomes challenging.
Developers active in the Vallejo market express concern over increasing costs affecting their projects’ profits in Vallejo.
Residential development in Vallejo has been slow in the last twenty years.
Under present market conditions, new market-rate
construction is unlikely to feasibly accommodate any
inclusionary requirement.
Economic & Planning Systems EPS PPT Presentation | 31
POTENTIAL NEXT STEPS
Choose not to
pursue now and
consider
revisiting at a
future time
Continue
developing a
policy and
suspend its
enforcement
until market
conditions shift
favorably
Create and adopt
ordinance now
with the
understanding
that it may
further impact
market
production
Options for the Inclusionary Housing Ordinance
UP NEXT: COMMERCIAL LINKAGE FEE ANALYSIS
DISCUSSION/Q&A ON INCLUSIONARY HOUSING
COMMERCIAL LINKAGE FEE
Economic & Planning Systems EPS PPT Presentation | 34
COMMERCIAL LINKAGE FEE RESEARCH QUESTIONS
Question EPS Task
1. What is happening in Vallejo’s
local non-residential market?
Conduct analysis of local market
and economic conditions.
2. What are other cities doing for
their commercial linkage fees?
Survey of policies in comparable
jurisdictions
3. What might Vallejo be able to
achieve with a commercial linkage
fee?
Complete commercial linkage fee
nexus study
Economic & Planning Systems EPS PPT Presentation | 35
NO SIGNIFICANT COMMERCIAL GROWTH IN VALLEJO IN LAST 20 YEARS Since 2006, commercial land use in Vallejo grew around 2 percent while in the rest of the county, it grew by nearly 10 percent.
Source: CoStar (2025)
0 5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 YTD
Square Feet
Commercial (Retail & Office) Square Footage, 2006 to present Vallejo Rest of Solano County
Economic & Planning Systems EPS PPT Presentation | 36
UNTIL RECENTLY, RETAIL RATES IN VALLEJO WERE LOWER
Source: CoStar (2025)
Vallejo
$21.23
Rest of Solano County
$17.42
Bay Area
$31.46
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 YTD
Rents per Sq. Ft.
Retail Rents per Square Foot, 2006 to present
Vallejo Rest of Solano County Bay Area
Economic & Planning Systems EPS PPT Presentation | 37
OFFICE RATES WERE ALSO LOWER BUT HAVE CAUGHT UP
Vallejo & Rest of Solano
County
$24.11
Bay Area
$44.13
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 YTD
Rents per Sq. Ft.
Office Rents per Square Foot, 2006 to present
Vallejo Rest of Solano County Bay Area
Economic & Planning Systems EPS PPT Presentation | 38
VALLEJO’S INDUSTRIAL MARKET HAS BEEN STAGNANT
Since 2006, industrial land use in Vallejo declined by 1 percent while in the rest of the county, it grew by 34 percent.
0 10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 YTD
Square Feet
Industrial/Flex Square Footage, 2006 to present
Vallejo Rest of Solano County
Economic & Planning Systems EPS PPT Presentation | 39
VALLEJO’S INDUSTRIAL PROPERTIES ARE COMPARATIVELY STRONG Vallejo
$14.46
Rest of Solano County
$6.10
Bay Area
$22.96
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 YTD
Rents per Sq. Ft.
Industrial Rents per Square Foot, 2006 to present
Vallejo Rest of Solano County Bay Area
Economic & Planning Systems EPS PPT Presentation | 40
NON-RESIDENTIAL DEVELOPMENT PIPELINE IS MORE PROMISING
Land Use Sq. Ft. of Pipeline
Development in Vallejo
Example Projects
Commercial 237,636
• Raising Cane’s restaurant
• New Auto Dealerships
• Costco
Lodging 49,741 • La Quinta Inn and Suites
Industrial 138,161 • DXD Self-Storage
Total 425,538
City staff have identified 453,000 square feet of non-residential development in the pipeline and likely to proceed in the next few years.
Economic & Planning Systems EPS PPT Presentation | 41
COMMERCIAL LINKAGE FEE COMPARISON
Fees per square foot are usually set much lower than the calculated maximum
Of the cities surveyed, most do not currently have a commercial linkage fee
COMMERCIAL LINKAGE FEE
$2
$8.05
$2 $2
$8.05
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
Richmond Oakland*
Fee per Square Foot
Non-Residential Commercial Linkage Fee
Commercial Lodging Industrial
No requirements: Solano County,
Dixon, Rio Vista, Suisun City,
Vacaville, Antioch, Martinez,
Hayward, Benicia, Concord, El
Cerrito
In progress:
Fairfield
*Oakland’s fee is applicable to all square footage above 25,000 square feet. It does not apply to Lodging.
Economic & Planning Systems EPS PPT Presentation | 42
NEXUS STUDY METHODOLOGY
Estimate number of new
workers per land use category
Calculate number of lower-
income workers
Calculate number of lower-
income households
Calculate maximum allowable
fee
Uses employment density
assumptions for Commercial,
Industrial, and Lodging
Data on wage distribution by
industry from JobsEQ
Based on assumptions of household
formation for each land use type
Calculated as the number of lower-
income households x subsidy per
affordable unit
Economic & Planning Systems EPS PPT Presentation | 43
COMMERCIAL LINKAGE FEE NEXUS STUDY
EPS calculated nexus-based maximum fees
Jurisdictions with commercial linkage fee programs adopt fees well below the nexus-based maximum fees to support economic
development objective
Land Use
Category
Total HHs Up
to 120% AMI
per 100k sq. ft.
Adjusted Total
Households 1
per 100k sq. ft.
Total Subsidy 2
per 100k sq. ft.
Estimated
Subsidy
per sq. ft.
Commercial
(Retail & Office) 121 90 $8,962,463 $90
Lodging 26 19 $1,925,818 $19
Industrial
(includes Flex) 33 25 $2,444,308 $24
[1] Adjusted to avoid potential double-counting of the 25.4% of people who work in Vallejo and also live in Vallejo (2023 LEHD data)
[2] Based on subsidy of $99,300 per unit as estimated from Sacramento Street Apartments.
Economic & Planning Systems EPS PPT Presentation | 44
HYPOTHETICAL SCENARIO
Assume fee is set at $5/sq. ft. for the three types of land uses How much fee revenue might be generated from the City’s development pipeline and how many units could that subsidize? Assume $99,300 per unit of City subsidy
Land Use Sq. Ft. of Pipeline
Development in Vallejo
$5/sq. ft. CLF revenue
Commercial 237,636 $1,188,180
Lodging 49,741 $248,705
Industrial 138,161 $690,805
Total 425,538 $2,127,690
= 21.4 units subsidized$2,127,960
$99,300
Economic & Planning Systems EPS PPT Presentation | 45
CONCLUSION & KEY FINDINGS
Vallejo has had very limited non-residential development activity in the last several years.
Most peer jurisdictions do not have this type of fee
program. The ones that do charge only a modest fee
amount.
The calculated nexus-based maximum fees are much
higher than what could reasonably be charged.
A competitive commercial linkage fee in Vallejo could
contribute modestly to affordable housing production.
Economic & Planning Systems EPS PPT Presentation | 46
POTENTIAL NEXT STEPS
Choose not to
pursue now and
consider
revisiting at a
future time
Continue
developing a
policy and
suspend its
enforcement
until market
conditions shift
favorably
Create and adopt
ordinance now
with the
understanding
that it may
further impact
market
production
Options for the Commercial Linkage Fee
Q&A
THANK YOU