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Home My WebLink AboutApprove as amended to Adopt Resolution No. 2007-71 Setting F City of Huntington Beach 2000 Main Street • Huntington Beach, CA 92648 0 i OFFICE OF THE CITY CLERK " JOAN L FLYNN CITY CLERK NOTICE OF ACTION October 30 2007 Planning Department City of Huntington Beach 2000 Main Street Huntington Beach CA 92648 SUBJECT SETTING FORTH AN AFFORDABLE HOUSING IN-LIEU FEE FOR NEW RESIDENTIAL PROJECTS CONSISTING OF THREE TO NINE UNITS APPLICANT City of Huntington Beach Planning Department 2000 Main Street Huntington Beach CA 92648 LOCATION Citywide DATE OF ACTION October 15 2007 On Monday October 15 2007 the City Council of the City of Huntington Beach took action on your application and approved your request to establish an affordable housing in-lieu fee for new residential projects that consist of three to nine units Sincerely I?") 6�J+4() Joan L Flynn City Clerk Sister Cities Anjo Japan • Waitakere New Zealand (Telephone 714 536 5227) Resolution No 2007 71 4 Monies in the Affordable Housing Trust Fund shall be used only to fund projects which have a minimum of fifty(50)percent of the dwelling units affordable to very-low and low income households, with at least twenty(20) percent of the units available to very-low income households based on the Orange County median income adjusted for appropriate family size as published by the United States Department of Housing and Uroan Development or established by the State of California, pursuant to Health and Safety Code Sections 50079 5 and 50093 or a successor statute 5 Permitted uses of the Affordable Housing Trust Fund shall be at the Council s discretion and include for pre-development costs land or air rights acquisition rehabilitation land write-downs administrative costs gap financing and lowering the interest rate of construction loans or permanent financing 6 Any units that obtain or benefit from the Affordable Housing Trust Funds shall maintain the affordability of the units for a minimum of sixty(60) years 7 The Affordable Housing In-Lieu Fee shall be adjusted every January beginning 2008 by the Cost of Living Index 8 The City Administrator or her designee shall administer the Affordable Housing Trust Fund and shall provide an annual report to City Council which report shall include the beginning balance ending balance a description of the projects funded or to be funded each fiscal year The first annual report shall be provided on or before December 1 2007 for the 2007-08 fiscal year PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 15th day of October _' 2007 r < REVIEWED AND APPROVED APPROVED AS TO FORM )City Administrator City Attorney INITIAT D AND APPROVED Direc or of annmg 06 494 001/13898 Resolution No 2007 71 EXHIBIT A Resolution No 2007 71 KEYSER 1VIARSTON ASSOCIATES ADVISORS IN PUBLIC/PRIVATE REAL ESTATE DEVELOYMENT age°�ti yll/� 10 MEMORANDUM 4.0 ADV LsoRs IN REAL ESTATE To Mary Beth Broeren Principal Planner REAL REDEVELOPMENT City of Huntington Beach ,fFORllAatE HOUSING IOMIC DEVELOPMENT From Kathleen Head SAN FRANCISCO A JERRY nWk Julie Romey TIMOTW C Ku" LUTE EARLE FUNK DEaat£M KERN Date January 23, 2006 k05ERTJ WETMORE LOSANGELES Subject Inclusionary Housing Ordinance- In-Lieu Fee CALVIN E.HOWS.It KATHUEN H HEAD JAMES A.RASE PALL G ANDERSON At our request Keyser ( ) prepared g analysis ascoRY D Soo-Hoo Y eq t, Ke Marston Associates Inc KMA eared the following anal �s L (Opertaining to the City of Huntington Beach(City) Inclusionary Housing Ordinance ' SAI'DECO rdinance) Specifically, KMA evaluated the Ordinance provision that allows 1D M.TRIMBCE PAULC.MARRA developers of projects with nine or fewer units to pay a fee in lieu of providing affordable housing units within their project The purpose of the following memorandum is to assist the City in establishing an in-lieu fee payment schedule to be applied to small projects INCLUSIONARY HOUSING ORDINANCE REQUIREMENTS The Ordinance requirements that must be considered in establishing an in-lieu fee schedule are 9 All for-sale and rental new construction housing projects with three or more units must make at least 10%of the units available to the following households ' a For-sale units must be made available to very-low low or median income households 2 b Rental units must be made available to very-low or low income households ' New residential protects are defined as an entirely new project or new units added to an existing project_ Only new units are used to calculate the required number of affordable housing units 2 The median is defined as the Orange County median income(Median) Soo SOUTH GRAND AVENUE,SUITE 1480> LOS ANGELES CALIFOMIA 90071 > PHONE 213 622 8095 > FAX,213 622 5204 Resolution No 2007 71 a � To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject inclusionary Housing Ordnance-In-Lieu Fee Page 2 2 The income and affordability covenants must remain in place for at least 60 years 3 The affordable units must be a Dispersed throughout the project; b Proportional in number bedroom size and location to the market rate units c Comparable with the market rate units in terms of the base design appearance materials and finish quality, and d Constructed and occupied concurrently with, or pnor to,the construction and occupancy of market rate units 4 For small projects defined as projects including nine or fewer units,the inciusionary housing requirements may be satisfied by payment of an in-lieu fee established by resolution of the City Council and updated annually-3 a The in-lieu fees will be deposited into a dedicated affordable housing account b The account will only be used to provide funding assistance for construction or retention of affordable housing, and for reasonable administration costs 5 Developers may choose to provide the affordable units at an off-site location as long as these units are under the full control of the Developer or other approved party The following outlines the other conditions a Off-site projects can be new construction or major physical rehabilitation of existing non-restricted units At nsk units and mobile homes may also be used to satisfy this requirement. b Off-site units must be constructed or rehabilitated pnor to or concurrently with the pnmary project. 3 The fees are to be based upon the total number and size of the new residential units Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject In lusionary Housing Ordinance- In-Lieu Fee Page 3 c The sales prices or rents must be affordable to very4ow, low or median income households pursuant to the terms of an Affordable Housing Agreement. METHODOLOGY The vast majority of new residential projects within Huntington Beach are expected to be comprised of lor sale"projects However, it is possible that rental development may also occur Recognizing that the project economics vary between ownership and rental projects and to avoid imposing onerous requirements on development,the KMA analysis evaluates both development types The first step in establishing an in-lieu fee is to quantify the financial impact associated with fulfilling the affordable housing requirements within market rate projects That financial impact is equal to the difference between the market rate prices and the affordable price for the required income restricted units This difference is known as the "affordability gap" and it is quantified using the following methodology i 1 The projected market rate sales prices and rents are compiled for prospective new residential projects 2 The maximum affordable prices and rents are calculated based on the standards imposed by California Health and Safety Code(Code)Sections 50052 5 and Section 50053 3 The difference between the market rate price and the defined affordable price represents the affordability gap associated with each income restricted unit required to be included in a market rate residential project 4 The affordability gap per income restricted unit is multiplied times the number of units that must be income restricted This represents the effective cost to a developer of fulfilling the inclustonary housing requirements on-site 5 Since a fee is going to be paid in-lieu of providing any affordable units on-site the effective cost is divided by the total square footage of the project. This represents the Base In-beu Fee amount. 6 The Ordinance limits the in-lieu fee option to projects with nine or fewer units The in-lieu fee analysis recognizes that the inclusionary requirement has a greater impact on smaller projects than it does for a typically sized project. Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23, 2006 Subject Inclusionary Housing Ordinance-In-Lieu Fee Page 4 7 The Small Project in-lieu fee reflects the number of units in the project, which can range between three and none units To achieve this, A is necessary to create a Sliding Scale In-Lieu Fee amount that can be justified based on both the affordability gap and the feasibility analysis for the three-to nale-und projects Household Incomes The Ordinance specifically identifies the Code Season 50093 income de&0on for moderate income households However, the Ordinance limits the moderate income category to 100%of the Median instead of the 120%of Median maxamum that is allowed by Section 50093 The Ordinance also imposes very-low and low income restrictions To account for these requirements KMA assumed that Code Section 50105 would apply for very-low income households and that Code Section 50079 5 would apply for low income households The income information is published by the State of California Housing and Community Development Department(HCD) annually The income ranges for Orange County in ; > 2005 are Very-Low Low Median Household Income Income Income Size (Section 50105) (Season 50079 5) Section 50093 1 Person $0-$26 900 $26 900-$43,000 $43 000-$53,000 2 Person $0-$30 700 $30 700- $49,150 $49,150-$60,550 3 Person $0-$34,550 $34,550-$55,300 $55,300-$68150 4 Person $0-$38,400 $38,400-$61,450 $61,450-$75,700 5 Person $0-$41,450 $41,450-$66,350 $66,350-$81,750 6 Person $0-$44,550 $44,550-$71,250 $71,250-$87,800 7 Person $0-$47,600 $47,600-$76,200 $76 200-$93,850 8 Person $0-$50,700 $50,700-$81,100 $81,100-$99 900 Affordable Housing Cost Calculation Methodology The Ordinance does not identify a methodology for calculating affordable housing cost. However historically the City has used the calculation methodologies imposed by the California Health and Safety Code Section 50053 defines the calculation methodology for rental units and Section 50052 5 provides the methodology for ownership units 6LExisting Affordable Housing Ordinance Requirements o Applies to new residential protects with 3 or more units o Requires 10% of units as affordable (on - site or off-site) o Requires for-sale units at Median income or lower; requires rental units at Low or Very Low income o Allows payment of an - lieu fee for only protects with 3 to 9 units . In - Lieu Fee Methodology o Calculate Affordability Gap Difference between market rate prices and income restricted (affordable) prices o Calculate Effective Cost to Developer Affordability Gap per affordable unit x required number of affordable units o Establish Base In - Lieu Fee Amount Effective Cost / Total Sq . Ft. of Project o Create a Small Project In - Lieu Fee Adjust Base In-Lieu Fee for small projects In - Lieu Fee Methodology (cont'd o Affordability Gap Ownership Project = $437,000 Rental Project = $105,000 o Effective Cost to Developer (Gap x 10%) Ownership Project = $43,700 Rental Project = $10,500 o Establish Base In-Lieu Fee (cost/Avg sq Ft ) 0 Ownership Project = $24 per sq ft a Rental Project = $12 per sq ft o Create a Small Project In-Lieu Fee (46% decrease in Base Fee) 9-unit Ownership Project = $13 per sq ft 9-unit Rental Project = $7 per sq ft o In-Lieu Fee study calculations updated for inflation Ownership Project = $14 55 per sq ft Rental Project = $7 84 per sq ft Proposed In Fee In-Lieu Fee Per Square Foot Of Habitable Area' Project Size Ownership Rental (No of Units) Projects Projects Three $8 28 $4 48 Four $9 29 $5 04 Five $10 41 $5 d 60 Six $11 42 $6 16 Seven $13 32 $7 16 Eight $13 54 $7 28 Nine $14 55 $7 84 'Habitable area excludes garage, porch, decks/ balconies Analysis o In - Lieu Fee methodology based on well- established , accepted practice o Adoption would provide alternative means for small projects to satisfy requirements o In - Lieu Fee revenues would be deposited in a Housing Trust Fund o Revenues would be used for uses listed in ordinance, including land acquisition , rehabilitation , gap financing , etc . o Development community has expressed interest in having the fee based solely on rental projects due to cost/feasibility . Analysis (cont'd ) o KMA recommends that the City make some changes to its affordable housing ordinance, to improve clarity and consistency with other regulations . Specify that ownership projects are at Median income level and rental projects are at low income levels. Specify the state code sections that would be used to calculate affordable housing cost. Specific that only allow new development and substantially rehabilitated units may be used to fulfill off-site requirements. Recommendation o Staff recommends the City Council : Adopt the Affordable Housing In - Lieu Fee for small projects Direct that a zoning text amendment be processed to modify the affordable housing ordinance pursuant to KMA"s recommendations . ATTACHMENT #4 EYSE MARS] ON ASSOCIA1 ES k0V1%0RS IN I 111i I It/I RIVAI I R I A I FSIAIt D tVE101MtNI MEMORANDUM AM I SORS IN RrA1 LiWC RLOLVLIOINIINI To Mary Beth Broeren Principal Planner AMORDAW HOLMN( City of Huntington Beach R-oNomii.. Divaoimthl SXN ERANCISCO From Kathleen Head 'N JCRXI KISSIl£ FIkim"yC, Kitty "E r%iw ruNK Date October 1 2007 DEIIBIE Ri Kk KN Rom it J W1IMtA t LO4 A'VC,Et E5 Subject Inclusionary Housing In Lieu Fee Calculation Methodology CALVIN L HOLLIS 11 KAINi w,H EIiAo )A US t RMq 1401 c,ANMRSW, In a memorandum dated January 23 2006 Keyser Marston Associates Inc (KMA) M(Oki 1) SOO 1100 recommended in lieu fee schedules for residential protects with nine or fewer units that SAN L?IE£,£1 are subject to the City of Huntington Beach (City) Inclusionary Housing Ordinance 0RAt M 1 RINIRl: (Ordinance) In a memorandum dated April 9 2007 KMA updated the recommended I it t C Si Yl�lt'1 fee schedules to reflect the percentage change in the median price for new homes in Orange County exhibited between December 2005 and December 2006 The fee schedule recommended in the April 9 2007 analysis is presented in the following table 2007 In Lieu Fee Schedule Fee Calculated Per Square Foot of Building Area in the Project Base Fee/Sq Ft $27 $13 Proiect Size Ownership Rental Three Units $8 28 $4 48 Four Units $9 29 $5 04 Five Units $10 41 $5 60 Six Units $11 42 $6 16 Seven Units $13 32 $7 16 Eight Units $13 54 $7 28 Nine Units $14 55 $7 84 A0 SOU I[I CRAN D AVENUE SUITE 1480> LESS ANC ELES CALIFORNIA 9007t > PHONE 213 622 8095 > FAx 213 622 5204 0709027L HTB KHH gbd WWW KI-YSFRMARSTON CUM 14066 004/014 To Mary Beth Broeren City of Huntington Beach October 1 2007 Subject Inclusionary Housing In Lieu Fee Calculation Methodology Page 2 PROPOSED MODIFICATIONS TO THE CALCULATION METHODOLOGY In a workshop held on July 30 2007 the Ad Hoc Ci ty Council Committee on Affordable Housing In Lieu Fees (In Lieu Fee Committee) requested that the in lieu fee calculation methodology be modified as follows 1 The in lieu fee should be calculated based on the number of units in the project rather than on the building area in the project 2 The in lieu fee should not vary between ownership and rental projects 3 The base year in lieu fee should be set at the average of the fee amount derived for ownership and rental projects The in lieu fee schedule identified in the January 2006 KMA analysis was based on a scale with uneven increases unit by unit between three and nine units At the City s request the currently recommended fee schedule increases the fee on a pro rata basis The in lieu fees calculations resulting from the Ad Hoc City Council Committee and City staff direction are provided in Table 1 and can be summarized as follows 2007 In Lieu Fee Schedule- Fee Calculated Per Unit in the Project Base Fee/ Unit $30 337 Proiect Size Fee/ Unit Total Fee Three Units $9 430 $28 290 Four Units $10 600 $42 400 Five Units $11 780 $58 900 Six Units $12 960 $77 760 Seven Units $14 140 $98 980 Eight Units $15 330 $122 640 Nine Units $16 500 $148 500 The KMA analysis recommended that the City adjust the fee amount annually based on the annual change in new home prices in Orange County This information is published by the Real Estate Research Council of Southern California in a quarterly report titled Real Estate and Construction Report' It is the KMA assumption that this adjustment methodology will be included in the in lieu fee regulations ' The information source is Data Quick Information Systems The original data are taken from county records and the prices are calculated from the documentary transfer tax Adjustments are made to remove very high end and very low end sales 0709027 HB KHH gbd 14066 004 014 To Mary Beth Broeren City of Huntington Beach October 1 2007 Subject Inclusionary Housing In Lieu Fee Calculation Methodology Page 3 FINDINGS The City s primary objectives in providing an in lieu fee option in the Ordinance is to establish an fee schedule that meets the following criteria 1 The funds should be sufficient to allow the City to produce the number of inclusionary units that would have bee n required within the project that has been allowed to pay the in lieu fee 2 The in lieu fee schedule should be set at amounts that do not render small projects economically infeasible It should be recognized that the currently proposed in lieu fee schedule will be insufficient to produce the inclusionary units in similar locations and product types to the market rate ownership units being developed However the establishment of an in lieu fee schedule requires the City to make several subjective judgments and decisions To that end KMA considered the following factors 1 The primary purpose of the Ordinance is to attract good quality affordable housing units to the community There is no stated objective to provide low and moderate income households with luxury housing units 2 New ownership housing units in Huntington Beach are commonly selling for prices in excess of$1 0 million It may be considered financially inefficient to provide affordable housing for moderate income households at that market price range 3 The potential exists to create a diverse mix of affordable housing on a more cost efficient basis in rental units and/or in infill locations As such the currently proposed in lieu fee schedule may provide sufficient revenues to produce the requisite number of inclusionary units in off site locations It is the KMA opinion that the currently proposed in lieu fee schedule balances the objectives to attract affordable housing units whil a limiting the in lieu fee to amounts that can be supported by small projects If the City wishes to allow projects with more than nine units to pay a fee in lieu of producing the required affordable units it would be appropriate to use the Base Fee identified in the schedule to calculate the applicable in lieu fee amount 0709027 HB KHH gbd 14066 004 014 TABLE 1 2005 IN LIEU FEE SUMMARY IN LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Average Unit Size Fee/Sq Ft I Base In lieu Fee(2005) (Sq Ft) Budding Area Fee/Unit Ownership Projects 1 800 $24 $43 700 Rental Projects 875 $12 $10 500 Average Fee Per Unit $27 100 II Base In lieu Fee for Small Protects Base In lieu Fee $27 100 Loss in Profit' 46% Base In lieu Fee for Small Projects $14 739 III Slidma Scale as a%of the Base In lieu Fee 2 3 Unit Projects 57% 4 Unit Projects 64% 5 Unit Projects 71% 6 Unit Projects 79% 7 Unit Projects 86% 8 Unit Projects 93% 9 Unit Projects 100% Fee I Unit Total Fee 2005 Data 2007 Update IV Slidma Scale In lieu Fee 11 94% s 3 Unit Projects $8 420 $9 430 $28 290 4 Unit Projects $9 470 $10 600 $42 400 5 Unit Projects $10 520 $11 780 $58 900 6 Unit Projects $11 580 $12 960 $77 760 7 Unit Projects $12 630 $14 140 $98 980 8 Unit Projects $13 690 $15 330 $122 640 9 Unit Projects $14 740 $16 500 $148 500 1 Based on KMA analysis dated January 23 2006 The three unit and nine unit fee amounts are based on the January 23 2006 analysis The sliding scale has been adjusted 2 to provide pro rata increases on a unit by unit basis 3 Based on the percentage change in the median price for new homes in Orange County between December 2005 and December 2006 The medians were$707 500 and$792 000 respectively The source is the Real Estate and Construction Report published by the Real Estate Research Council of Southern California Prepared by Keyser Marston Associates Inc File name In lieu 10 01 07 Table 1 FEATTACHMENT #5 Landscaping Tree wells adjacent to landscape parkways on the e of curb is encouraged,however shall not encroach into 24 foot wide drive aisle Also see Chapter 232 L n 230 26 Affordable Housing (3687 12/o4) A rMose 1 The purpose and intent of this Chapter is to implement the goals,objectives and policies of the City's Housing Element It is untended to encourage very low,low-and median income housing,wluch is integrated,compatible with and complements adjacent uses,and is located in close proximity to public and commercial services (3687-12/04) 2 The affordable housing program is one tool the City utilizes to meet its commitment to provide housing affordable to all economic sectors,and to meet its regional fair- share requirements for construction of affordable housing (3687 12/o4) B Applicability This section shall apply to new residential projects three(3)or more units in size (3687-12/o4) 1 A minimum of ten(10)percent of all new residential construction shall be affordable housing units (36s7 12/04) c 2 Rental units included in the project shall be made available to very low or low- income households based on the Orange County Median Income,adjusted for appropriate family size,as published by the United States Department of Housing and Urban Development or established by the State of California,pursuant to Health and Safety Code Section 50093,or a successor statute (3687 12/04) 3 For sale units included in the project shall be made available to very low, low or median income level households based on the Orange County Median Income, adjusted for appropriate family size,as published by the United States Department of Housing and Urban Development or established by the State of California, pursuant to Health and Safety Code Section 50093, or a successor statute (3687 1M4) 4 Developers of residential projects consisting of nine or fewer units may elect to pay a fee in lieu of providing the units on-site to fulfill the requirement of the Section, unless the affordable housing requirement is outlined as part of a specific plan project (3687 12/04) 5 Developers of residential projects may elect to provide the affordable units at an off-site location pursuant to subsection B unless otherwise outlined as part of a specific plan project If affordable units are off-site,they must be under the full control of the applicant,or other approved party (3687 12/04) 6 New residential projects shall include construction of an entirely new project or new units added to an existing project For purposes of determining the required number of affordable housing units only new units shall be counted (3687 12/04) Huntington Beach Zoning and Subdivision Ordinance Chapter 230 Page 17 of 55 C Fees in Lieu of Construction 1 Fees paid to fulfill the requirements of this Section shall be placed in the City's Affordable Housing Trust Fund,the use of which is governed by subsection E (3687 12/04) 2 The amount of the in-lieu fees shall be calculated using the fee schedule established annually by resolution of the City Council (3687 12/04) 3 One hundred(100)percent of the fees required by this Section shall be paid prior to issuance of a building permit (3687 12/o4) 4 Fees paid as a result of new residential projects shall be based upon the total number and size of the new residential units which are to be constructed (3687- 12/04) D Off-Site Construction of Affordable Units Except as may be required by the California Coastal Act and/or the California Government Code Section 65590 or a successor statute, developers may provide the required affordable housing off-site, at one or several sites, within the City of Huntington Beach (3687 12/04) 1 Off-site projects may be new construction or major physical rehabilitation,equal to more than one-third the value of the existing improvement,excluding land value,of existing non-restricted units conditioned upon being restricted to long- term affordability "At Risk"units identified in the Housing Element or mobile homes may be used to satisfy this requirement (3687 12/04) 2 All affordable off-site housing shall be constructed or rehabilitated prior to or - concurrently with the primary project Final approval (occupancy)of the first market rate residential unit shall be contingent upon the completion and public availability,or evidence of the applicant's reasonable progress towards attainment of completion,of the affordable units (3687 12/04) E Miscellaneous Provisions 1 The conditions of approval for any project that requires affordable units shall specify the following items (3687 12/04) (a) The density bonus being provided pursuant to Section 23014, if any, (3687 12104) (b) The number of affordable units (3687 12/04) (c) The number of units at each income level as related to Orange County Median Income,and (3687 12/04) (d) A list of any other incentives offered by the City (3687 12/04) 2 An Affordable Housing Agreement outlining all aspects of the affordable housing provisions shall be executed between the applicant and the City and recorded with the Orange County Recorder's Office prior to issuance of the first building permit (3687-12/04) f 3 The Agreement shall specify an affordability term of not less than sixty(60)years (3687 12/04) Huntington Beach Zoning and Subdivision Ordnance Chapter 230 Page 18 of 55 4 In a project requiring an in-lieu fee,the applicant shall execute and record an Agreement to pay an Affordable Housing In-Lieu Fee (3687 12104) 5 All affordable on-site units in a project shall be constructed concurrently with or prior to the construction of the primary project units unless otherwise approved through a phasing plan Final approval(occupancy)of the first market rate residential unit shall be contingent upon the completion and public availability,or evidence of the applicant's reasonable progress towards attainment of completion, of the affordable units (3W7 12/04) 6 All affordable units shall be reasonably dispersed throughout the project unless otherwise designed through a master plan, shall contain on average the same number of bedrooms as the market rate units in the project, and shall be comparable with the market rate units in terms of exterior appearance,materials and finished quality (3687 1204) 7 Affordable Housing Trust Funds shall be used for projects winch have a minimum of fifty(50)percent of the dwelling units affordable to very low-and low-income households,with at least twenty(20)percent of the units available to very low- income households Concurrent with establishing the annual fee schedule pursuant to subsection C,the City Council shall by resolution set forth the permitted uses of Affordable Housing Trust Funds All units that obtain Affordable Housing Trust Funds shall maintain the affordability of the units for a muumum of sixty (60)years The funds may,at the discretion of the City Council,be used for pre- development costs, land or air rights acquisition, rehabilitation, land write downs, administrative costs,gap financing,or to lower the interest rate of construction loans or permanent financing (3687 12/04) f 8 New affordable units shall be occupied in the following manner (3687 12/04) (a) If residential rental units are being demolished and the existing tenant(s) meets the eligibility requirements,he/she shall be given the right of first refusal to occupy the affordable umt(s), or (3687-1vo4) (b) If there are no qualified tenants or if the qualified tenant(s)chooses not to exercise the right of first refusal, or if no demolition of residential rental units occurs,then qualified households or buyers will be selected (3657 12/04) F Price of Affordable Units Affordable units shall be sold or rented at prices affordable to very low, low-or median-income households pursuant to terms of the Affordable Housing Agreement (3687 12/04) 230 2 eserved) 230.30 (Reserved) Non-Residential Districts 23032 Service Stations 4 The following supplemental development standards I apply to the Service Station use classification A Minimum parcel size 22,500 square feet Huntington Beach Zoning and Subdivision Ordinance Chapter 230 Page 19 of 55 LATTACHMENT #6 Affordable Housing In -Lieu Fee (ft 1 t ber2007 Oc o 15, f f� Request oAdopt affordable housing in - lieu fee for small residential projects with 3 to 9 units, pursuant to a study prepared by Keyser j Marston Associates ( KMA) oDirect staff to process text changes to the affordable housing ordinance Background `i o City Council approved affordable housing ordinance October 2004 o Ordinance allows for an in - lieu fee for f projects with 3 to 9 units o City Council held a study session in May 2006 and a public hearing in May 2007 o City Council Ad Hoc Committee met July 2006 and July 2007 Existing Affordable Housing Ordinance Requirements o Applies to new residential projects with �- 3 or more units o Requires 10% of units as affordable (on- ' site or off-site) o Requires for-sale units at Median income or lower; requires rental units at Low or Very Low income o Allows payment of in- lieu fee for only projects with 3 to 9 units . In- Lieu Fee Methodology o Calculate Affordability Gap . Difference between market rate prices and income restricted (affordable) prices � o Calculate Effective Cost to Developer • Affordability Gap per affordable unit x required number of affordable units o Establish Base In- Lieu Fee Amount . Effective Cost / Total Sq Ft. of Project o Create a Small Project In - Lieu Fee . Adjust Base In-Lieu Fee for small projects Per Square Foot In -Lieu Fee Maypresented 2007 In-Lieu Fee Per Square Foot Of Habitable Areal Project Size Ownership Rental (No of Units) Projects Projects Three $8 28 $4 48 Four $9 29 $5 04 Five $10 41 $5 60 Six $11 42 $6 16 Seven $13 32 $7 16 Eight $13 54 $7 28 Nine $14 55 $7 84 'Habitable area excludes garage, porch, decks/ balconies Ad Hoc Committee Direction o Revise Methodology : • To reduce the amount of fees overall t N and simplify the fee structure by having one fee for both ownership and rental projects • To not penalize projects w/ larger units ( i . e . more square footage) and develop a per unit fee CurrentlyProposed In- Lieu Fee Project Size Per Unit (No of Units) In-Lieu Fee Three $9,430 Four $ 10,600 Five $ 11,780 Six $ 12,960 Seven $ 14 J40 Eight $ 15,330 [Nine $ 16, 500 Comparison of Per Unit and Per Square Foot In-lieu Fees Original Methodology Revised Methodology (Currently Proposed) Type of Per Sq Ft Total Feel Per Unit Total Fee Project Fee Feel Ownership $14 55 $235,710 $16,500 $148,500 (effectively (effectively $26,190/unit) $9 17/sq ft ) Rental $7 84 $61 ,740 $16,500 $148,500 (effectively (effectively $6,860/unit) $18 86/sq ft ) Based on 1 ,800 sq ft ownership unit and 875 sq ft rental unit, includes habitable area only Total project size is nine units Analysis o In - Lieu Fee methodology based on well - � > established , accepted practice o Adoption would provide alternative means for small projects to satisfy requirements o In - Lieu Fee revenues would be deposited in a Housing Trust Fund o Revenues would be used for uses listed in ordinance, including land acquisition , rehabilitation , gap financing , etc. Analysis (cont'd ) 14 o KMA recommends that the City make some changes to its affordable housing ordinance, to improve clarity and � consistency with other regulations . . Specify that ownership projects are at Median income level and rental projects are at low income levels. . Specify the state code sections that would be used to calculate affordable housing cost. . Specific that only allow new development and substantially rehabilitated units may be used to fulfill off-site requirements Recommendation o Staff recommends the City Council : # � . Adopt the Affordable Housing In - Lieu Fee for small projects . Direct that a zoning text amendment be processed to modify the affordable housing ordinance pursuant to KMA*'s recommendations . RCA ROUTING SHEET INITIATING DEPARTMENT PLANNING SUBJECT Affordable Housing In-Lieu Fee COUNCIL MEETING DATE October 15, 2007 RCA ATTACHMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable ❑ Resolution (w/exhibits & legislative draft if applicable) Attached Not Applicable ❑ Tract Map Location Map and/or other Exhibits Attached ❑ Not Applicable ❑ Attached ❑ Contract/Agreement (w/exhibits if applicable) Not Applicable ❑ (Signed In full by the City Attorney) Attached ❑ Subleases Third Party Agreements etc Not Applicable ❑ (Approved as to form by City Attorney) Certificates of Insurance (Approved b the City Attorne Attached ❑ ( Pp Y Y Y) Not Applicable ❑ Attached ❑ Fiscal Impact Statement (Unbudget over $5 000) Not Applicable ❑ Attached ❑ Bonds (If applicable) Not Applicable ❑ Attached ❑ Staff Report (If applicable) Not Applicable ❑ Commission Board or Committee Re ort If applicable Attached ❑ p ( pp ) Not Applicable ❑ Findings/Conditions for Approval and/or Denial Attached ElNot Applicable ❑ EXPLANATION FOR MISSING ATTACHMENTS REVIEWED RETURNED FORWARDED Administrative Staff Assistant City Administrator Initial City Administrator (Initial) ( ) ( ) City Clerk ) EXPLANATION FOR RETURN OF ITEM U � Only)(Below Space For City Clerk's Use RCA Author SH MBB October 15, 2007 - Council/Agency Agenda - Page 7 ASSISTANT CITY CLERK ROBIN LUGAR ANNOUNCED 3 COMMUNICATIONS 9 SPEAKERS APPROVED 6-0-1 (HARDYABSTAIN) D-3 (City Council) Public Hearing to Adopt Resolution No 2007-71 Setting Forth an Affordable Housing In-Lieu Fee for New Residential Projects Consisting of Three to Nine Units Communication from the Director of Planning transmitting the following Statement of Issue NOTICE IS HEREBY GIVEN that on Monday October 15 2007 at 6 00 p m in the City Council Chambers 2000 Main Street Huntington Beach the City Council will hold a public hearing on the following planning and zoning items AFFORDABLE HOUSING IN-LIEU FEE Applicant City of Huntington Beach 2000 Main Street Huntington Beach CA 92648 Request To establish an affordable housing in-lieu fee for new residential projects that consist of three to nine units Location Citywide Project Planner Mary Beth Broeren NOTICE IS HEREBY GIVEN that Items No 1 is exempt from the provisions of the California Environmental Quality Act pursuant to Section 15061(b)(3) ON FILE A copy of the proposed requests are on file in the Planning Department 2000 Main Street Huntington Beach California 92648 for inspection by the public Copies of the staff reports will be available to interested parties at the City Clerk s Office on Thursday October 11 2007 ALL INTERESTED PERSONS are invited to attend said hearing and express opinions or submit evidence for or against the applications as outlined above If you challenge the City Council s action in court you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice or in written correspondence delivered to the City at or prior to the public hearing If there are any further questions please call the Planning Department at 536 5271 and refer to the above items Direct your written communications to the City Clerk ■ Staff report ■ City Council discussion ■ Open public hearing • Following public input close public hearing **PowerPoint presentation titled Affordable Housing In-Lieu Fee is included in the agenda packet Recommended Action Motion to 1) Adopt Resolution No 2007-71, A Resolution of the City Council of the City of Huntington Beach Setting Forth an Affordable Housing In-Lieu Fee as Authorized by Zoning and Subdivision Ordinance 3687 Section 230 26 October 15, 2007 - Council/Agency Agenda - Page 8 And 2) Direct staff to process a Zoning Text Amendment to amend Section 230 26 to incorporate recommendations outlined in the Keyser Marston Associates report dated January 23 2006 1 SPEAKER APPROVED 7-0 AS AMENDED TO ELIMINATE PROVISION#6 IN RESOLUTION D-4 (City Council) Public Hearing to Consider Adoption of Ordinance No 3784 Amending Huntington Beach Municipal Code Section 17 56 060—the Huntington Beach Fire Code, Regarding Permissible Sprinkler Omissions Approved for Introduction September 17 2007 Communication from the Fire Chief transmitting the following Statement of Issue NOTICE IS HEREBY GIVEN that on Monday October 15 2007 at 7 00 p m in the City Council Chambers 2000 Main Street Huntington Beach the City Council will hold a Public Hearing regarding Ordinance No 3784 Ordinance No 3784 will amend Huntington Beach Municipal Code Chapter 17 56 which adopted the Uniform Fire Code 2000 Edition and the California Fire Code 2001 edition including Appendices I-A I-B I C II A II-C II-D II-E II-K II-H III-A III-C and IV-A The amendment concerns permissible fire sprinkler omissions NOTICE IS FURTHER given that a copy of the proposed ordinance is on file in the Office of the City Clerk 2000 Main Street Huntington Beach California for inspection by the public ALL INTERESTED PERSONS are invited to attend said hearing and express opinions or submit evidence for or against the proposed ordinance If there are any further questions please call the Fire Department at 714/536 5411 and refer to the above item Direct your communications to the City Clerk ■ Staff report ■ City Council discussion ■ Open public hearing • Following public input close public hearing Recommended Action Motion to After City Clerk reads by title Adopt Ordinance No 3784 An Ordinance of the City of Huntington Beach Amending Huntington Beach Municipal Code Chapter 17 56— The Huntington Beach Fire Code— Pertaining to Sprinklers by roll call vote ASSISTANT CITY CLERK ROBIN LUGAR READ INTO THE RECORD THE TITLE OF ORDINANCE NO 3784 APPROVED 7-0 RESOLUTION NO 2007-71 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH SETTING FORTH AN AFFORDABLE MOUSING IN-LIEU FEF AS AUTHORIZED BY ZONING & SUBDIVISI K ORDINANCE 3687 SECTION 230 26 WHEREAS, on November 1, 2004 the Council adopted Ordinancev 3687 adding Zoning & Subdivision Ordinance Section 230 26,relating to the goals and objectives of the City's Housing Element, which is intended to encourage very-low, lowland median housing Pursuant to Section 230 26(B), a minimum of ten(10)percent of all residential construction projects of three (3) or more units must provide affordable housing units, Pursuant to Section 230 26(b)(4), developers of residential projects consisting of nine or fewer units may elect to pay a fee in lieu of providing the required affordable units on site to fulfill the City's requirement of the Inclusionary Housin&Ordinance, unless the affordable housing requirement is outlined as part of a Specific Plan Project, The City Council has received the report from Keyser Marston Associates dated January 23, 2006, which includes an analysis pertaining toyfhe City's Inclusionary Housing Ordinance and proposes an in-lieu fee consistent with the provisions of Zoning & Subdivision Ordinance Section 230 26 A copy of this study, as updated since January 23, 2006, is attached hereto as Exhibit A and incorporated herein by this re erence NOW, THEREFORE,the City Council of the City of Huntington Beach does hereby resolve as follows 1 The Keyser Marston eport attached hereto as Exhibit A is received and filed 2 The proposed per roject in-lieu fee shall be as follows Pro)eolt Size In Lieu Fee Total Fee Three UlY $9,430 $28 290 Four Units $10,600 $42,400 Five Units $11,780 $58,900 Six Units $12,960 $77,760 Seven Units $14,140 $98,980 Eight Units $15,330 $122,640 Nine Units $16 500 $148 500 2 An Affordable Housing Trust Fund shall be created and used to receive all deposit of in-lieu fees paid pursuant to Zoning & Subdivision Section 230 26 Interest shall accrue to the fund and no other funds shall be commingled 1 06 494 001/13898 3 Monies in the Affordable Housing Trust Fund shall be used only to fund p 0ects which have a minimum of fifty (50)percent of the dwelling units affordable to very-lo and low income households, with at least twenty(20)percent of the units available to very lo income households based on the Orange County median income, adjusted for appropriate Plnily size, as published by the United States Department of Housing and Urban Development r established by the State of California, pursuant to Health and Safety Code Sections 50079 and 50093, or a successor statute 4 Permitted uses of the Affordable Housing Trust Fund shy 1 be at the Council's discretion and include for pre development costs, land or air rights acquisition, rehabilitation, land write-downs, administrative costs, gap financing, and lowerin/K interest rate of construction loans or permanent financing 5 Any units that obtain or benefit from the Affo/dable Housing Trust Funds shall maintain the affordability of the units for a minimum of sixty(60) years 6 The Affordable Housing Fee shall be u dated every two years beginning in January 2008 7 The Affordable Housing In-Lieu ee shall be adjusted every January beginning 2008 by the Cost of Living Index 8 The City Administrator or er designee shall administer the Affordable Housing Trust Fund and shall provide an annual eport to City Council, which report shall include the beginning balance, ending balance, a escription of the projects funded or to be funded each fiscal year The first annual report all be provided on or before December 1, 2007 for the 2007-08 fiscal year PASSED AND ADO ED by the City Council of the City of Huntington Beach at a regular meeting thereof hel on the day of 52007 Mayor REVIEWED AN APPROVED APPROVED AS TO FORM Z�,)"4 (/,J� LqA i f�\11 "I CCity Ad nistrator Ci y Attorne 1NITI ED AND APPROVED Dire or of lannmg 2 06 494 001/13898 NOTICE OF PUBLIC HEARING BEFORE THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH NOTICE IS HEREBY GIVEN that on Monday October 15 2007, at 6 00 p m in the City Council Chambers 2000 Main Street Huntington Beach the City Council will hold a public hearing on the following planning and zoning items ❑ 1 AFFORDABLE HOUSING IN-LIEU FEE Applicant City of Huntington Beach 2000 Main Street Huntington Beach CA 92648 Request To establish an affordable housing in-lieu fee for new residential projects that consist of three to nine units Location Citywide Proiect Planner Mary Beth Broeren NOTICE IS HEREBY GIVEN that Items No 1 is exempt from the provisions of the California Environmental Quality Act pursuant to Section 15061(b)(3) ON FILE A copy of the proposed requests are on file in the Planning Department 2000 Main Street Huntington Beach California 92648 for inspection by the public Copies of the staff reports will be available to interested parties at the City Clerk's Office on Thursday October 11 2007 ALL INTERESTED PERSONS are invited to attend said hearing and express opinions or submit evidence for or against the applications as outlined above If you challenge the City Councils action in court you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice or in written correspondence delivered to the City at or prior to the public hearing If there are any further questions please call the Planning Department at 536-5271 and refer to the above items Direct your written communications to the City Clerk Joan L Flynn City Clerk City of Huntington Beach 2000 Main Street, 2nd Floor Huntington Beach California 92648 (714) 536-5227 G \PattyE\Public Hearing - Affordable Housing doc Huntington Beach Independent has been adjudged a newspaper of general cir(ulation in Huntington Beach and Orange County by Decree of the Supenor Court of Orange County State of California under date of Aug 24 1994 case A50479 PROOF OF PUBLICATION STATE OF CALIFORNIA ) ) SS COUNTY OF ORANGE ) / staff reports will be am the Citizen of the United States and a available to interested NOTICE OF PUBLIC HEARING parties at the City resident of the County aforesaid, I am over Clerk s Office on the age of eighteen ears and not a art BEFOREiHECITYITY COUNCIL Thursday October 11 g g Y party OF THE CITY OF ALL INTERESTED PER to or interested in the below entitled matter HUNTINGTON BEACH SONS are invited to at NOTICE IS HEREBY GIV tend said hearing and am a principal clerk of the HUNTINGTON EN that on Monday Oc express opinions or sub tober 15 2007 at 6 00 mit evidence for or BEACH INDEPENDENT a newspaper of p in in the City Council against the applications Chambers 2000 Main as outlined above If you general circulation printed and published in Street Huntington challenge the City Coun Beach the City Council cd s action in court you the City of Huntington Beach County of will hold a public hear may be limited to rats mg on the following mg only those issues Orange State of California and the planning and zoning you or somgone else items raised at the public attached Notice is a true and complete copy ❑ 1 AFFORDABLE hearing described in this as was printed and published on the Applicant SING IN LIEU FEE notrespondence or m written cor A Iicant Cityof Hun res ondence delivered tington Beach 2000 to the City at or prior following date(s) Main Street Huntington to the public hearing If Beach CA 92648 Re there are any further quest Too establish an questions please call the affordable housing in Planning Department at lieu fee for new residen 536 5271 and refer to teal projects that consist the above items Direct of three to nine units your written commum Location Citywide cations to the City Clerk Project Planner Mary Joan L Flynn City Clerk Beth Broeren City of Huntington Beach NOTICE IS HEREBY HIV 2000 Main Street 2nd Floor OCTOBER 0 4, 2 0 0 7 EN that Items No 1 is Huntington Beach exempt from the prove California 92648 sions of the California (714)536 5227 Environmental Quality Published Huntington Act pursuant to Section Beach Independent Oc 15061(b)(3) tober 4 2007 101 891 ON FILE A copy of the proposed requests are on file in the Planning Department 2000 Main Street Huntington Beach California 92648 for inspection by the declare under penalty of perjury that the loublic Copies of the foregoing is true and correct Executed on OCTOBER 0 4,2 0 0 7 at Huntington Beach California Signature Huntington Beach Independent has been adjudged a newspaper of general circulation in Huntington Beach and Orange County by Decree of the Superior Court of Orange County State of California under date of Aug 24 1994 case A-,)0479 PROOF OF PUBLICATION STATE OF CALIFORNIA ) ) SS COUNTY OF ORANGE ) I am the Citizen of the United States and a J staff reports will be resident of the Count aforesaid, I am over available to interested Y NOTICEOF PUBLIC HEARING parties at the City the age of eighteen ears and not a art clerks Office on 9 9 Y party BEFORE THE CITY COUNCIL Thursday October 11 to or interested in the below entitled matter OF THE CITY OF 2007 ALL INTERESTED PER I am aprincipal clerk of the HUNTINGTON HCE IS HEREBTON Y CH SONS are invited to at NOTICE IS HEREBY GIV tend said hearing and BEACH INDEPENDENT a news a er of EN that on Monday De express opinions or sub p p tober 15 2007 at 6 00 mit evidence for or the a general circulation printed and published in Chambers in ine 2000 Main asainst outhned abovlecons If�you Streethe City of Huntington Beach County of Beach tthe HCity'C uncil chslaction in court e the City you ite Orange, State of California and the ng bond theu follohwingear ngy onlylrthosetoissules attached Notice is a true and complete copy planning and zoning you or someone else dems raised at the public ❑ 1 AFFORDABLE hearing described in this as was printed and published on the HOUSING IN LIEU FEE notice or in written cor following date(s) Applicant City of Hun respondence delivered tington Beach 2000 to the City at or prior Man Street Huntington to the public hearing If Beach CA 92648 Re there are any further quest To establish an questions please call the affordable housing in Planning Department at lieu fee for new residen 536 5271 and refer to teal projects that consist the above items Direct of three to mnepnits your written commum Location Citywide cations to the City Clerk Pro( ct Planner Mary Joan L Flynn City Clerk OCTOBER 4 2 0 0 7 Beth Broeren City of Huntington Beach i NOTICE IS HEREBY .,IV 2000 Main Street 2nd Floor EN that Items No 1 is Huntington Beach exempt from the prove California 92648 sions of the California (714)536 5227 Environmental Quality Published Huntington Act pursuant to Section Beach Independent Oc 15061(b)(3) tober4 2007 101 891 ON FILE A copy of the proposed requests are on file in the Planning Department 2000 Man Street Huntington 48 1 declare, under penalty of perjury that the Beach Californiaetio y26th for inspection b the foregoing is true and correct public Copies of the Executed on OCTOBER 0 4,2 0 0 7 at Huntington Beach California Signature s CITY COUNCIUREDEVELOPMENT AGENCY PUBLIC HEARING REQUEST SUBJECT _� ,/1 ��J 42 e...--� DEPARTMENT � � MEETING DATE 10 0 O�D _ CONTACT 4 PHONE N/A YES NO ( ) ( ) Is the notice attached? ( ) ( ) Do the Heading and Closing of Notice reflect City Council(and/or Redevelopment Agency)hearing? ( ) ( ) Are the date, day and time of the public heanng correct? } ( ) ( ) If an appeal is the appellant's name included in the notice? ( ) ( ) If Coastal Development Permit,does the notice include appeal language? ( ) ( ) Is there an Environmental Status to be approved by Council? ( ) ( ) Is a map attached for publication? ( ) ( ) Is a larger ad required? Size Is the venfication statement attached indicating the sour and accuracy of the mailing list? tv�?I&-' r'P3 ( ) ( ) Are the applicant's name and address part of the mailing labels? ( ) ( ) Are the appellant s name and address part of the mailing labels? ( ) ( ) If Coastal Development Permit, is the Coastal Commission part of the mailing labels? ( ) ( ) If Coastal Development Permit,are the Resident labels attached? ( ) ( ) Is the33343 report attached? (Economic Development Dept items only) Please complete the following I Muumum days from publication to hearing date l 0 /'DA-,l1�-- 2 Number of times to be published 1 3 Number of days between publications a4& Easy Peel Labels U i A See Instruction Sheet I Use Avery®TEMPLATE 5900 - IFjf-M*& rKLISF�- for Easy Peel Feature NAVERY@5960T""1 MAILING LABELS- President Roger Kinoshita Kerry Smith H B Chamber of Commerce 500 N State College Blvd Ste 100 Harbinger Homes 19891 Beach Blvd Ste 140 Orange CA 92868 2728 1711,St Huntington Beach CA 92648 Huntington Beach A 92648 Dave Stefamdes William D Holman Dave MacLeod Orange County Assoc of Realtors PLC 19671 Beach Blvd Ste 101 25552 La Paz Road 19 Corporate Plaza Drive Huntington Beach CA 92648 Laguna Hills CA 92653 Newport Beach CA 92660 7912 Bilan Sassounian Dick Harlow Michael C Adams Associates 21190 Beach Blvd 1742 Main Street PO Box 382 Huntington Beach CA 92648 Huntington Beach CA 92648 Huntington Beach CA 92648 0382 Duf Sfreddo Dick and Kevin Kelter Jeff Bergsma 5622 Research Dr Ste A 18281 Gothard Ste 203 Team Design/Construction Huntington Beach CA 92649 Huntington Beach CA 92648 221 Main St. Ste S Huntington Beach CA 92648 President Keith Dawson Gil kousizerat Huntington Beach Tomorrow 15581 Placid Cir 17912 Gothard St PO Box 865 Huntington Beach CA 92647 Huntington Beach CA 92647 Huntington Beach CA 92648 Julie Vandermost Ed Bonnam Hearthside Homes BIA OC 5622 Research Dr Ste A Ed Mountford 17744 Sky Park Circle #170 Huntington Beach CA 92649 6 Executive Circle Suite 250 Irvine CA 92614 4441 Irvine CA 92614 Richard Spicer Michael Gagnet Jot Cergen SCAG Makar Properties LLC 211 B Main St 818 West 7th 12th Floor PO Box 7080 Huntington Beach CA 92648 Los Angeles CA 90017 Newport Beach CA 92660 Sarah Phan Bob Reed John&Kathy Zehndc r 2500 S Fairview St #P 528 141'St 614 201h St Santa Ana CA 92704 Huntington Beach CA 92648 Huntington Beach CA 92648 Duc Nguyen,AIA John Laing Homes Dave Oddo 11770 E Warner Ave #216 Cclena Chen 815 Main St I-ountam Vallcy CA 92708 3121 Michelson Dr Ste 200 Huntington Beach CA 92648 Irvine CA 92612 7672 Shea Homes Dave Birt Larry Brose Ron Metzler John Laing Homes Robcrt Mayer Corp 603 S Valencia Ave 6401 Warner Ave Apt 408 660 Newport(enter Dr Ste 1050 Brea CA 92823 Huntington Beach CA 92647 Newport Beach CA 92660 Eti uettes facdes a eler i� 3�G��JI q p IOA5—w 7� Consultez la fewlle vvvvw avert'coin Utilisez le gabarit AVERY@ 5960mc Sens de chargement IA-) d instruction 1 800 GO AVERY G j Vic.)� 14.!mrN/ 1 Council/Agency Meeting Held D &Z Qo Deferred/Continued to A proved onditionally Approved ❑ Denied City I rk s ignatur Council Meeting Date 10/15/2007 Department umber PL07-31 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO HONORABLE MAYOR AND CITY OUNCIL MEMBERS SUBMITTED BY PE LOPE UL RETH-G A T D A CITY ADMINISTRATOR PREPARED BY SCOTT HESS DIRECTOR OF PLANNING'*-A SUBJECT Adopt Resolution setting forth an Affordable Housing In-Lieu Fee Statement of Issue Funding Source Recommended Action Alternative Action(s) Analysis Environmental Status Attachments) Statement of Issue Transmitted for City Council consideration is a resolution that establishes an affordable housing in-lieu fee for new residential projects with three to nine units Payment of the fee is allowed by the City s affordable housing ordinance Staff recommends the City Council approve the resolution because adoption of the in-lieu fee will provide an alternative means for developers of small projects to satisfy the City s inclusionary housing requirements In addition there are three suggested improvements by Keyser Marston Associates to the existing affordable housing ordinance that staff recommends the City Council initiate Funding Source Not applicable Recommended Action STAFF RECOMMENDATION Motion to 1 Adopt Resolution No 2007-71 a resolution setting forth an Affordable Housing In-Lieu Fee as authorized by Zoning & Subdivision Ordinance 3687 Section 230 26 (ATTACHMENT NO 1) 2 Direct staff to process a zoning text amendment to amend Section 230 26 to incorporate recommendations outlined in the Keyser Marston Associates report dated January 23 2006 (ATTACHMENT NO 2) REQUEST FOR ACTION MEETING DATE 10/15/2007 DEPARTMENT ID NUMBER PL07-31 Alternative Action(s) The City Council may make the following alternative motion(s) 1 "Deny the resolution setting forth the Affordable Housing In-Lieu Fee " 2 Continue the resolution setting forth the Affordable Housing In-Lieu Fee and direct staff accordingly 3 Direct staff to include additional changes in the zoning text amendment that would modify the existing affordable housing ordinance Analysis A PROJECT PROPOSAL Applicant City of Huntington Beach Location Citywide The proposed fee resolution represents a request to establish an in-lieu fee for affordable housing pursuant to Section 230 26 B 4 of the Huntington Beach Zoning and Subdivision Ordinance (ATTACHMENT NO 5) The proposed fee amounts are as follows Project Size Per Unit No of Units In-Lieu Fee Three $9 430 Four $10 600 Five $11,780 Six $12 960 Seven $14 140 Eight $15,330 Nine $16 500 Developers of small projects (three to nine units) would have the option of paying the fee in lieu of recording a covenant on a unit in their project Fee revenues would be deposited in a new account called the Housing Trust Fund the uses of the fee are set forth in the resolution and generally include a variety of widely-used financing techniques to assist the development community B BACKGROUND The City of Huntington Beach has had an inclusionary housing requirement since the early 1990s as set forth by policy In October 2004 the City Council adopted an ordinance that codified this policy and established the option for payment of an in-lieu fee for projects with G\RCAs\2007\PL07 31 a (AffordabieHousingIn Lieu Fee)doc 2 10/2/2007 9 34 AM REQUEST FOR ACTION MEETING DATE 10/15/2007 DEPARTMENT ID NUMBER PL07-31 three to nine units Pursuant to the ordinance the City retained Keyser Marston Associates (KMA) to prepare a nexus study to calculate an appropriate and legally defensible in-lieu fee (ATTACHMENT NO 2) The City Council reviewed the nexus study at a Study Session in May 2006 and formed an Ad Hoc Committee to further discuss issues related to the analysis The Ad Hoc Committee with representatives from the Chamber of Commerce Building Industry Association and Huntington Beach Tomorrow met on July 25 2006 Proposed in-lieu fees calculated on a per square foot basis for both rental and ownership projects were presented to the City Council for approval on May 7 2007 (the RCA for that meeting is provided as ATTACHMENT NO 3) Based on various comments the City Council directed staff to hold another Ad Hoc Committee meeting to discuss possible revisions to the fee On July 30 2007 the Ad Hoc Committee met with representatives from the Chamber of Commerce and Building Industry Association and gave direction to the staff and consultant to calculate the fee on a per unit basis and to establish one fee for both rental and ownership projects The Ad Hoc Committee also decided it would continue to meet and discuss other issues related to affordable housing requirements C STAFF ANALYSIS AND RECOMMENDATION The purpose of the KMA study was to calculate an in-lieu fee that developers of projects with three to nine units could pay to satisfy their inclusionary affordable housing requirement The study quantified the difference between market rate prices and income restricted (affordable) prices in the City of Huntington Beach for rental and for-sale projects this difference is referred to as the affordability gap The average affordability gap for ownership projects was $437 400 and $105 000 for rental projects Although the initial study calculated the fees on a per square foot basis based on direction from the Ad Hoc Committee KMA used this same information to calculate the proposed in-lieu fees on a per unit basis with adjustments for inflation to 2007 dollars (see ATTACHMENT NO 4 for KMA memo regarding per unit fee calculations) The table below compares the fees for the two methodologies for a nine unit project Original Methodology Revised Methodology (Currently Proposed) Type of Per Sq Ft Total Feel Per Unit Total Project Fee Fee' Fee Ownership $14 55 $235 710 $16 500 $148 500 (effective) $26 190/unit) (effectively $9 17/sq ft ) Rental $7 84 $61 740 $16 500 $148 500 (effective) $6 860/unit) (effective) $18 86/sq ft ) Based on 1 800 sq ft ownership unit and 875 sq ft rental unit includes habitable area only Total project size is nine units As demonstrated in the preceeding table the per unit fees for ownership projects would notably decrease Because most of the small (3-9 units) projects that have been built in the G\RCAs\2007\PL07 31a (AfFordableHousmgin LieuFee)doc 3 10/2/2007 9 34 AM REQUEST FOR ACTION MEETING DATE 10/15/2007 DEPARTMENT ID NUMBER PL07-31 city in recent past are for-sale projects the proposed per unit fee would bring significant relief to developers of these types of projects The city may experience some small scale rental projects which would be adversely affected by the per unit method when compared with the per square foot method However, these projects would still benefit from being able to at least pay an in-lieu fee It has also been the City s experience that the economics of doing small scale rental projects given land costs and other market factors indicate that this is not a type of development that would predominate Staff and KMA believe that the nexus study and follow-up memoranda present a well documented reasonable and legally defensible in-lieu fee for projects with three to nine units Based on Input from developers of small projects over the years, staff believes that providing an alternative means to satisfy the City s inclusionary housing agreement is needed Developers have consistently noted concerns related to financing monitoring and qualifying buyers/renters as a result of having to restrict one on-site unit in a small project Pursuant to the City affordable housing ordinance in-lieu fee payments would be deposited in a Housing Trust Fund This fund will be established upon receipt of the first in-lieu fee payment The City s ordinance lists the uses for the Housing Trust Fund and restricts the use of funds for projects that have a minimum of 50 percent of the units affordable to very low and low income households with at least 20 percent of the units available to very low income households At the discretion of the City Council, the funds may be used for pre- development costs land or air rights acquisition rehabilitation land write downs administrative costs gap financing or to lower the interest rate of construction loans or permanent financing The Economic Development Department would administer the Housing Trust Fund Other Issues related to the In-Lieu Fee The Ad Hoc City Council Committee has decided to continue to meet to discuss various topics related to the in-lieu fee including allowance of a fee for all projects fee methodology and Regional Housing Needs Assessment (RHNA) requirements Affordable Housing Ordinance Changes As part of KMA s work in calculating an in-lieu the City requested that they review the existing affordable housing ordinance and make recommendations to improve it Their three recommendations are listed on page 16 of their original report (ATTACHMENT NO 2) and are listed below 1 The Ordinance should make it clear that developers can fulfill the inclusionary requirements with Median income units for ownership projects and low income units for rental projects 2 The Ordinance should mandate that the affordable housing cost be calculated in accordance with the Code Section 50052 5 standards for ownership units and Code Section 50053 standards for rental units and G\RCAs\2007\PL07 31a (AffordabieHousingln LieuFee)doc 4 10/2/2007 9 34 AM REQUEST FOR ACTION MEETING DATE 10/15/2007 DEPARTMENT ID NUMBER PL07-31 3 The Ordinance should only allow new development and substantial rehabilitation as defined by the Code Section 33413 affordable housing production requirements to fulfill the off-site inclusionary housing option allowed by the Ordinance Staff recommends the City Council direct that a zoning text amendment be processed to evaluate these recommended ordinance changes Depending on the City Council s direction with regard to the other items in this RCA, these ordinance changes may or may not be necessary or may need to be augmented D SUMMARY Staff recommends that the City Council adopt the resolution to establish an affordable housing in-lieu fee for projects with three to nine units consistent with the City s existing ordinance Adoption of the proposed resolution will bring immediate relief to developers of smaller projects and would not preclude the City from subsequently modifying the fee structure if the City Council wishes to make the fee available to larger projects Staff also recommends that the City Council initiate a zoning text amendment to incorporate the recommended ordinance changes articulated by KMA Strategic Plan Goal The affordable housing in-lieu fee is consistent with Strategic Plan Goal L-1 Establish the vision and create a land use plan for reuse of critical parcels so that the next phase of the community investment and improvement can begin The proposed in-lieu fee will create a source of funds that the City can use to assist development and redevelopment of parcels suitable for housing and to stimulate investment in target areas Environmental Status The proposed request is exempt from the California Environmental Quality Act pursuant to Section 15061 (b)(3) G\RCAs\2007\PL07 31a (AffordableHousingln beuFee)doc 5 10/2/2007 9 34 AM REQUEST FOR ACTION MEETING DATE 10/15/2007 DEPARTMENT ID NUMBER PL07-31 AttachmentsCity Clerk's Page NumberNo. Description Resolution No 2007-71 a resolution setting forth an 1 affordable housing in-lieu fee as authorized by Zoning & Subdivision Ordinance 3687 Section 230 26 Keyser Marston Associates Memorandum dated January 23 2 2006 Inclusionary Housing Ordinance In-Lieu Fee 3 City Council staff report dated May 7 2007 Keyser Marston Associates Memorandum dated October 1, 4 2007, Inclusionary Housing In-Lieu Fee Calculation Methodology Existing Zoning and Subdivision Ordinance Section 230 26 5 Affordable Housing 6 PowerPoint Presentation Slides SH MBB G\RCAs\2007\PL07 31a (AffordabieHousingin LieuFee)doc 6 10/2/2007 9 34 AM ATTACHMENT # 1 RESOLUTION NO 2007-71 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH SETTING FORTH AN AFFORDABLE HOUSING IN-LIEU FEE AS AUTHORIZED BY ZONING& SUBDIVISION ORDINANCE 3687 SECTION 230 26 WHEREAS, on November 1 2004 the Council adopted Ordinance No 3687 adding Zoning& Subdivision Ordinance Section 230 26 relating to the goals and objectives of the City s Housing Element, which is intended to encourage very-low low and median housing Pursuant to Section 230 26(B) a minimum of ten(10) percent of all residential construction projects of three (3) or more units must provide affordable housing units Pursuant to Section 230 26(b)(4) developers of residential projects consisting of nine or fewer units may elect to pay a fee in lieu of providing the required affordable units on site to fulfill the City s requirement of the Inclusionary Housing Ordinance unless the affordable housing requirement is outlined as part of a Specific Plan Project The City Council has received the report from Keyser Marston Associates dated January 23 2006 which includes an analysis pertaining to the City s Inclusionary Housing Ordinance and proposes an in-lieu fee consistent with the provisions of Zoning& Subdivision Ordinance Section 230 26 A copy of this study as updated since January 23 2006 is attached hereto as Exhibit A and incorporated herein by this reference NOW THEREFORE the City Council of the City of Huntington Beach does hereby resolve as follows 1 The Keyser Marston report attached hereto as Exhibit A is received and filed 2 The proposed per project in-lieu fee shall be as follows Project Size In Lieu Fee Total Fee Three Units $9 430 $28 290 Four Units $10 600 $42 400 Five Units $11 780 $58 900 Six Units $12 960 $77,760 Seven Units $14,140 $98 980 Eight Units $15 330 $122 640 Nine Units $16 500 $148 500 3 An Affordable Housing Trust Fund shall be created and used to receive all deposits of in-lieu fees paid pursuant to Zoning & Subdivision Section 230 26 Interest shall accrue to the fund and no other funds shall be commingled 1 06 494 001/13898 Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Inclusionary Housing Ordnance-In-Lieu Fee Page 5 AFFORDABILITY GAP ANALYSIS—OWNERSHIP PROJECTS(APPENDIX A) Market Rate Sales Paces Hanleywood Market Intelligence information indicates that the following single-family detached and attached residential protects are currently selling or recently sold out in Huntington Beach Year Product Number Built Sold Out Type of Units Seabridge Villas 4 2003 2004 Condos 344 Bel Air 2004 --- Duplex 102 Peninsula Point 2004 — Detached 13 Sea Cove 2004 — Townhomes 106 Total Units 565 As shown in Appendix A—Table 1 the following summarizes the sales prices for each product type l Average Average Unit Size Sales Average (80 Prices $ISf One-bedroom Units 811 $348,500 $430 Two-bedroom Units 1 418 $567,000 $400 Three-bedroom Units 2,484 $923 800 $367 Averages 1 841 $854 000 $464 Pncrng Assumptions The market rate sales pnces are based on the following assumptions Unit Size Sales (Sf) $/Sf Prices One-bedroom Units 800 $430 $343,600 Two-bedroom Units 1400 $400 $559,700 Three-bedroom Units 2 500 $367 $918 600 3 4 The project was built in the 1980 s and was converted frorn apartments to condominiums in 2003 Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Indusionary Housing Ordinance- In-l-teu Fee Page 6 Affordable Housing Cost Calculation The affordable housing cost calculations included in the Code Section 50052 5 definition are 1 The household incomes are based on a benchmark household size equal to one person more than the number of bedrooms 2 The Ordinance sets the maximum household income for moderate income units at 100°l0 of the Medan as published by HCD 5 3 Thirty-five percent(35%)of the defined household income is allocated to housing related expenses These expenses are defined as mortgage debt service payments, property taxes, maintenance costs, insurance costs,home owners association (HOA)dues and utility costs The Huntington Beach Redevelopment Agency(Agency) has historically calculated these costs for the City using the following assumptions 1 a Typically,the Agency estimates HOA fees inclusive of homeowner's insurance, based on the actual HOA fees for a project_ Therefore, KMA estimated the HOA fees by calculating the weighted average of the project comparables in Appendix A--Table 1 b The maintenance costs are estimated at$50 per month c The 2005 utility allowances are provided by the Orange County Housing Authority and include gas electricity, trash and water expenses These costs are as follows One-bedroom Units $71 Two-bedroom Units $82 Three--bedroom Units $115 d In accordance with the Agency s methodology the property tax cost is estimated at 1 08%of the projected affordable price for the units 4 The mortgage amount that can be supported by a Median income household is based on a 30-year fully amortizing mortgage at 6 5%interest rate s s It is reasonable to assume that given a choice a developer will provide Median incoine ownership units rather than very-low or low income ownership units Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Inclusionary Housing Ordinance-In-Lieu Fee Page 7 Assuming the home buyer makes a down payment equal to 10%of the affordable purchase price the affordable prices for the Median income units in 2005 are One-Bedroom Two-Bedroom Three-Bedroom Units Units Units Supportable Mortgage $188 500 $217,800 $242,800 Home Buyer Down Payment 20 900 24,100 27,000 Affordable Purchase Pace $209 400 $241,900 $269,800 Affordability Gap Calculations The results of the affordability gap analysis for Median income households are presented in Appendix A—Table 3 The analysis identifies the gaps between the maximum affordable prices and the projected market rate sales prices for one- two-and three-bedroom units the results are summarized below One- Two- Three- Bedroom Bedroom Bedroom Units Units Units Market Sales Prices $343,600 $559,700 $918 600 (Less) Median Income Sales Prices (209 400) (241,900) 269 800 Affordability Gap $134,200 $317 800 $648 800 For the purposes of this analysis, KMA distributed the units as follows 25°/one bedrooms, 25%two bedrooms and 50%three bedrooms Based on these assumptions the average affordability gap per Median income unit is estimated at $437 400 lnclusionary Housing Obligation Cost The Ordinance requires developers to impose income and affordability restrictions on at least 10%of the units in an ownership project It is the KMA assumption that developers would typically minimize the financial gap by earmarking the units for Median income households rather than for very-low or low income households When the$437,400 gap per affordable unit is distributed across all units in a project, the cost is equal to $43 700 per unit($437 400 x 10%=$43,700) s The level annual debt service amount on a loan at 6 5%interest is equal to 7 58%multiplied times the original balance on the first trust deed mortgage Resolution No 2007 71 To Mary Beth Broeren City of Huntington Bead January 23 2006 Subject inclusionary Housing Ordinance-In-Lieu Fee Page 8 AFFORDABILITY GAP ANALYSIS—RENTAL PROJECTS (APPENDIX B) The methodology used in the KMA affordability gap analysis for rental developments can be described as follows 1 KMA obtained rents for recently renovated market rate apartment complexes in Huntington Beach from www rentnet.com 2 KMA calculated the maximum affordable rents for low income households based on the household income statistics dmtnbuted by HCD and the affordability standards imposed by Code Section 50053 T 3 To maximize management efficiency new apartment projects typically include at least 50 units a For the purposes of this analysis KMA created a 50-unit prototype apartment project,and estimated the affordability gap associated with the imposition of low income rents on 101/6 of the units The affordability gap was then translated into the value reduction generated by the income and affordabTi dy restrictions imposed by the Ordinance i 4 The Ordinance does not allow projects with more than nine units to pay the in- lieu fee However,given the dearth of small new apartment projects it is necessary to premise the affordability gap analysis on a larger project The gap derived from this analysis is then adjusted to reflect the characteristics associated with a project that would qualify for the in-lieu fee payment option The tables that detail the rental analysis are located in Appendix B, and are organized as follows Table 1 Apartment Rental Rate Comparables Table 2. Affordable Rent for Low Income Households Table 3 Project Value—100%[Market Rate Units Table 4 Project Value—100% Low Income Units Table 5 Affordability Gap Calculation—Rental Projects 7 KMA assumed that developers will choose to provide low income units rather than very4ow income units 8 Small investors will sometimes develop a smaller project to hold over the long-term However in the current market place d is far more financially advantageous to build a small condominium project rather than a small apartment project. Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Indusionary Housing Ordinance-1n-Ueu Fee Page 9 Market Rate Rents The vast majority of the recently constructed apartment projects in Huntington Beach have been subject to long-term income and affordability restrictions Given the lack of new rental development, KMA gathered rent comparables for apartment buildings that have been renovated since 2000 The following illustrates the average asking rents for recently rehabilitated apartment units in Huntington Beach Unit Size Monthly Unit T (M Rents $18f Studio Units 452 $1 000 $2-26 One-bedroom Units 723 $1 200 $1 67 Two-bedroom Units 988 $1,500 $1 50 Three-bedroom Units 1 364 $1 700 $1 27 Based on the current market and development trends, KMA assumed that a typical apartment project would be focused on one-and two-bedroom units Assuming a 151% premium for new construction the projected market rents for a new apartment project P are as follows Unit Size Monthly Unit Type $/Sf Rents One-bedroom Units 750 $1 92 $1 443 Two-bedroom Units 1 000 $1 73 $1 729 Affordable Housing Rent Calculations The Ordinance requires 101%of the units in a rental development to be subject to very- low or low income and affordability restrictions Historically,the City has applied the Code Section 50053 affordable housing cost definition to the indusionary housing rental units The calculations are presented in Appendix B—Table 2 and the results can be summarized as follows 1 The household incomes are based on benchmark household sizes of two persons for one-bedroom units and three persons for two-bedroom units 2 The household income is set at 600A of the Median for low income units 3 30% of the defined household income is allocated to housing related expenses 4 Resolution No 2007 71 To Mary Beth Broeren,City of Huntington Beach January 23, 2006 Subject. Inclusionary Housing Ordinance-In-Lieu Fee Page 10 4 The maximum allowable rent must be adjusted to reflect the fact that the tenants will be required to pay for interior utility costs Based on the 2005 allowances provided by the County of Orange Housing Authority, the utilities are estimated at $32 per month for one-bedroom units and $40 per month for two-bedroom units 9 5 The income and affordability covenants must be imposed over at least a 60-year term The maximum allowable 2005 low income rents under the defined income categories are as follows Monthly Unit Type Rents One-bedroom Units $877 Two-bedroom Units $982 As a practical matter,tenants will not be willing to pay rent that exceeds the prevailing rate in the market area As such it is important to estimate the rents that could be achieved by apartments that are not subject to income and affordability restrictions As can be seen in the following table,the projected market rents exceed the maximum affordable rents by 39%to 431/6 Thus, KMA has applied the defined affordable rents to our affordability gap analysis Market Low Unit Type Rate Income Difference One-bedroom Units $1443 $877 (39%) Two-bedroom Units $1,729 $982 43% Affordability Gap Calculations The affordability gap calculations are presented in Appendix B Table 3 provides a pro forma analysis for a market rate project and Table 4 presents the findings for a low income project The assumptions that were applied to each scenano are 1 The market rate and income restricted rents are based on the assumptions discussed in the preceding section of this analysis 2 The revenue analyses include$15 per unit per month in miscellaneous income and a 5%vacancy and collection allowance I 9 Rental utility allowances include gas and electricity expenses only Resolution No 2007 71 To Mary Beth Broeren, City of Huntington Beach January 23, 2006 Subject: Inclusionary Housing Ordinance- In-Lieu Fee Page 11 3 The general operating expenses are estimated at$3 800 per unit and a$250 per unit per year allowance is provided to fund an operating and capital reserve account. 4 The property tax expense estimates vary among the market rate and income restricted apartment projects The expense cost is equal to the value supported by the project at a 1 1%property tax rate 5 The net operating income(NOI)for both the market rate and income restricted units was capitalized at a 6 0 A rate to estimate the relative values supported by market rate and tow income units Based on the preceding assumptions the values per unit are estimated as follows NO[/Unit Value/Unit 100% Market Rate $12 000 $200,000 100% Low Income $5 700 $95 000 Appendix B—Table 5 illustrates the affordability gaps per affordable unit,which are summarized as follows Market Rate Scenano Value/Unit $200 000 (Less) Low Income Value/Unit (95,500 Affordability Gap $105 000 Inclusionary Housing Obligation Cost The Ordinance requires developers to set-aside 10%of the units in a rental project for very-low or low income households Based on the KMA analysis the affordability gap is estimated at an average of$105 000 per income restricted unit included in the project A developer that chooses to pay the in-lieu fee will not be providing any affordable units within their market rate project To translate the weighted average affordability gap into an in-lieu fee payment per market rate unit, it is necessary to multiply$105,000 tunes the 10%inclusionary housing requirement. This equates to$10,500 per unit development in a market rate project Resolution No 2007 71 To Mary Beth Broeren, City of Huntington Beach January 23, 2006 Subject. inclustonary Housing Ordinance-In-Lieu Fee Page 12 2005 MAXIMUM ALLOWABLE IN-LIEU FEES The City's objective is to establish an in-lieu fee schedule that provides the City with adequate funds to produce the indusionary units in similar locations and product types However, the primary reason the Ordinance aflows projects with nine or fewer units to pay an in-lieu fee is that the City recognizes that the imposition of income and affordability restrictions has a disproportionate impact on small projects Therefore,it is necessary to establish an in-lieu fee schedule that does not render small projects economically infeasible In order to demonstrate the effective cost of fulfilling the Ordinance's production requirements,the KMA financial analysis is based on the characteristics embodied by larger projects than would be allowed to pay the in-lieu fee This in turn provides the foundation for creating an in lieu fee schedule that does not render small development financially infeasible 1 The Base in-Lieu fee is calculated at the 100%estimated affordability gap for a typically seed project 2 Based on the survey data presented in this report,the average ownership unit is estimated at 1 800 square feet in size and the average rental unit is estimated at 875 square feet in size 3 The Base In-Lieu fees that correlate to the financial analyses presented in the financial analysts(Base In-Lieu Fees)are as follows Per Per Per Sf of Affordable Market Rate Building Unit Unit Area Ownership Projects $437 400 $43 700 $24 Rental Projects $105 000 $10 500 $12 KMA prepared comparative pro forma analyses of 30-und and nine-unit"for sale' projects to assist in understanding the financial characteristics of the different project sizes (Appendix C—Table 1) Based on current projections,the developer profit per unit is approximately 46% less for the nine-unit project than the projected profit for the 30- unit project. To equalize the impact of the Ordinance s production requirement for projects with 10 or more units, and the in-lieu fee option provided to projects with nine or fewer units, KMA reduced the Base In-Lieu Fee by 46% Resolution No 2007 71 To Mary Beth Broeren, City of i-Juntington Beach January 23 2006 Subject~ inclusionary Housing Ordinance-In-Lieu Fee Page 13 The resulting fees for nine-und projects are Per Sf of Budcft Area Ownership Projects $13 Rental Pro cts $7 It is important to recognize that the financial impacts grow at a disproportionate rate as the project size decreases To reflect this, KMA created the following sliding scale for three-to none-unit projects t0 Asa%of Small Project Project Size Base Fee Three Units 57% Four Units 64% Five Units 71% Six Units 790A f Seven Units 920A Eight Units 93% Nine Units 10010/0 The in-lieu fees that result from the sliding scale are Project Size Ownership Rental Three Units $7 $4 Four Units $8 $4 Five Units $9 $5 Six Units $10 $6 Seven Units $12 $6 Eight Units $12 $7 Nine Units $13 $7 iO It is difficult to preciseiy project the financial impact generated at each protect size The recommended sliding scale percentages are based on the scales currently being applied in West Hollywood and Pasadena. Resolution No 2007 71 To Mary Beth Broeren, City of Huntington Beach January 23 2006 Subject Indusionary Housing Ordinance-In-Lieu Fee Page 14 IN-LIEU FEE COMPARISON ANALYSIS To assist the City in setting the in-lieu fee payment amount, KMA compiled information from other Southern California jurisdictions that have inclusionary housing requirements, and that allow in-lieu fees to be paid it is important to note, however,that the majority of the surveyed cities calculate the in-lieu fee on a case-by-case basis In addition, many cities require the City Council to provide discretionary approval for a fee to be paid in-lieu of producing the affordable units For the surveyed cities that have established fee schedules,the ui-lieu fee is calculated on one of the following bases 1 Per square foot of building area included in the project; 2 Per unit developed in a market rate project, or 3 As a percentage of project or construction valuation The in-lieu fees charged in the surveyed cities are presented in the following tables Per Square Foot of BuildEiqg Area Jurisdiction In-Lieu Fee Amount Chino $2 72 Duarte $6 50 Pasadena 12 Rental Projects $12--$22 Ownership Projects $5-$41 San Diego " $1 25-$2.50 Santa Monica 14 $22.33-$26 08 West Hollywood $6 70-$13 40 "The m-lieu fee amount is only applicable to projects developed in the Preserve 12 Projects with fewer than 10 units are exempt from the Program 73 The lower fee is charged for projects with fewer than 10 units 14 The lower fee is charged for apartment projects and the higher fee is charged for ownership projects 1 15 An in-lieu fee can only be paid for projects with 20 or fewer units The fee varies by number of units in the project Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Indusionary Housing Ordinance-In-Lieu Fee Page 15 Per Unit in a Market Rate Project Jurisdiction In-Deu Fee Amount Agoura H'drs $4,541 -$6,277 Laguna Beach " $7,047 Coronado $7,000 As a%of Pr ect/Construction Valuation Junsdicttion In-Ueu Fee Amount San Clemente 1 00% San Juan Ca 1 00% The in-lieu fees being charged by the surveyed cities vary widely Moreover,since many cities negotiate the in-lieu fee on a case-by-case basis it is very difficult to identify the "typical' in-lieu fee being charged by cities that are implementing mclusionary housing programs However, based on the available information,the maximum supportable fee in Huntington Beach is within the range of the fees currently being charged by other Southern California cities IN-LIEU FEE RECOMMENDATIONS The establishment of an in-lieu fee amount requires several subjective judgments and decisions To provide a framework for our recommendations, KMA considered the following factors 1 The City's primary objective is to attract sufficient housing to fulfill the affordable housing production requirements imposed by Code Section 33413, and to eliminate the unmet need for affordable housing identified in the Regional Housing Needs Assessment(RHNA) 2 An inclusconary housing production requirement has a greater financial impact on small projects than it does on large projects To mitigate this, the provision of an in-heu fee option is an efficient method of enforcing the Ordnance without stopping the development of smaller projects 16 The lower fee is charged for apartment projects and the higher fee is charged for ownership projects "The fee is set at$46 978 per affordable lot or unit, 15%of the units are required to be affordable Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach January 23,2006 Subject. inclusionary Housing Ordinance-In-lieu Fee Page 16 The preceding analysis indicates that the affordability gap is $24 per square foot for ownership units and $12 per square foot for rental projects However, d is the KMA conclusion that fees of the this magnitude are likely to render small projects infeasible To balance the City's objective to generate revenues to pursue affordable housing activities against the need to ensure that the in-lieu fee does not result in a constraint to development KMA recommends that the m-tieu fee schedule be set as follows Project Size Ownership Rental Three Units $7 $4 Four Units $8 $4 Five Units $9 $5 Sex Units $10 $6 Seven Units $12 $6 Eight Units $12 $7 Nine Units $13 $7 KMA also offers the following recommendations 1 The City should create a mechanism for re-evaluating the in-lieu fee amount on a l periodic basis KMA suggests that the re-evaluation be performed at least every two years so that the in-lieu fee can keep pace with changes in the market place 2 The Ordinance should be amended to provide the following clarifications a The Ordinance should make it clear that developers can fulfill the inclusionary requirements with Median income units for ownership projects and low income units for rental projects, b The Ordinance should mandate that the affordable housing cost be calculated in accordance with the Code Section 50052-5 standards for ownership units and Code Section 50053 standards for rental units'$,and c The Ordinance should only allow new development and substantial rehabilitation as defined by the Code Section 33413 affordable housing production requirements to fulfill the off-site inclusionary housing option allowed by the Ordinance 'e The Gty has set 100%of the Median as the maximum income for the moderate income"for ` sale'units This standard should replace the 110%of the Median applied in the Code Section 50052 5 affordable housing cost calculation Resolution No 2007 71 APPENDIX A OWNERSHIP ANALYSIS t I Resolution No 2007 71 APPENDIX A-TABLE) NEW CONSTRUCTION SALES COMPARABLES Vt11EU FEE ANALYSIS HUNIINGTON BEACH.CALIFORNIA Floorplans Year Bmtt/ Type Unit 11 of Und Base ProleclfAddress Sold Out HOA Fee m _ Type Unds Size(Sf) Pace $/Sf 11 Seabndge Villas 2003 Condo One-bedroom 72 485 $230 000 $474 Beach Blvd&Adams 2004 $350 One-bedroom 19 760 310 000 408 One-bedroom 83 765 300 000 392 One-bedroom 46 885 360 000 407 Two-bedrooms 24 970 335 000 345 Two-bedrooms 59 1095 405 000 370 Tura-bedrooms 8 1 100 340 000 309 Two-bedrooms 4 1,240 415 000 335 Two-bedrooms 29 1285 470 000 366 ToUWAverages 3" 850 $330 974 $389 U Bel Air 2004 Duplex Three-bedrooms 28 2.484 $910 000 $366 Gothard&Garfield $276 Three-bedrooms 25 2 497 898 820 360 Three-bedrooms 26 Z555 920 000 360 Three-bedrooms 23 Z636 907 855 344 TotaWAverages 102 2 539 $909,365 $358 III Peninsula Point 2004 SFD Three-bedrooms 5 1990 $869 900 $437 Mara Street&Clay $95 Thy 7 2,174 899 900 414 Three-bedrooms 1 2,260 919,90 407 TotaWAverages 13 2,110 $889 900 $422 N Sea Cove 2004 Tawniwrnes One-bedroom 26 )770 $838 990 $474 PCH&Goldenwest $405 Two-bedrooms 19 1 620 829 990 512 Two43edrooms 21 1 845 917 990 498 Two-bedrooms 19 Z690 987 990 367 Three-bedrooms 21 Z450 1 014 990 414 Totais/Averages 106 2,058 $914 603 $445 V lAttached Units I Large Projects 552 1 AM $863140 $46$ One-bedroom 246 811 $348 470 $430 Two-bedrooms 183 1418 $567 019 $400 Three-bedrooms 123 Z524 $927 399 $367 VL IDetached Units I Small Project 13 2,110 $889,90o $422 Three-bedroom Units 13 2,110 $W 900 $422 VIL JAU Units 565 1" $8531986 $464 One-bedroom 246 811 $348 470 $430 Two-bedrooms 183 1418 $567 019 $400 Three-bedrooms 136 Z484 $9M 814 $367 Source Hanteywood Market Intelligence for the City of Huntington Beach Prepared by Keyser Marston Associates Inc_ Resolution No 2007 71 APPENDIX A-TABLE 2 AFFORDABLE HOUSING PRICES -=U FEE ANALYSIS HuNTINGTON BEACH.CALIFORNIA One-bedroom Two-bedroom Three-bedroom Units Units Units I Household Income @ 100%of County Median' $60 550 $68150 $75 700 If Income Available for Mortgage Debt Service Income Allotted for Housing @ 35%of Income 2 $21.200 $23 900 $26 500 (Less)Ongoing Expenses HOA,insurance Maintenance 3 (3 792) (3 792) (3 792) Utilities 4 (852) (984) (1„380) Property Taxes @ 1 08%of Affordable Price 3 (2.Zti1) (2.603) (2.914) Income Available for Mortgage Debt Service $14 294 $16 521 $18 414 IN Maximum Mortgage @ 6 5%Interest Rate 5 $188 500 $217 800 $242,800 IV Home Buyer Down Payment @ 10°k Affordable Price 3 $20 900 $24100 $27 000 V Imaximum Affordable Home Price $209,400 $241 900 $269,800 ti 1 i Based on the 2005 Orange County median incomes provided by HCD Per the requirements unposed by CaGfonia Health and Safety Code Section 50052 5 the household size is set at three persons for twotedroom units and four persons for three-bedroom units. The Ordinance Gmds the moderate income units to households earning 1000/6 of the median. 2 Based on Caldomia Heatth and Safety Code Section 50052 5 3 Based on the Redevelopment Agency's assumptions The Agency calculates the affordable prices for the Q-tY Based on the current Orange County utility allowances Includes gas electricity water and trash 5 Based on the current 30-year fixed mortgage rate Prepared try- )Geyser Marston Assooates Inc Resolution No 2007 71 APPENDIX A-TABLE 3 AFFORDABILITY GAP CALCULATION-OWNERSHIP PROJECTS IN-LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA One-bedroom Two-bedroom Three-bedroom Units Units Units I Affordability Gap Calculation Market Sales Prices' $343 600 $559 700 $918 600 (Less)Maximum Affordable Sales Prices z (209 400) (241900) (269 800) AffordabiTrty Gap/Affordable Unit $134 200 $317,800 $648,800 Affordability Unit Type 11 Average Affordability Gap Calculation Gap Distribution' One-bedroom Units $134,2U0 25°k Two-bedroom Units $317 800 25% TYuee-bedroom Units $648 800 W/o Average Affordability Gap/Affordable Unit $437 400 III Affordability Gan/Total Unit Calculation Average Affordability Gap/Affordable Unit $437 4W Affordable Units as a%of Total Units 4 100/4 Affordabdtty Gap/Total Unit $43,700 i i Market rate prices are based on the following 800 sf one-bedroom units @$4301sf 1400 sf ivvo-bedroom WAS 0$400/sf and 2 500 sf three-bedroom units j@$367/sf 2 See APPENDIX A-TABLE 2 3 KMA estimate 4 Based on the City Ordinance Prepared by- Keyser Marston Associates Inc Resolution No 2007 71 APPENDIX B RENTAL ANALYSIS Resolution No 2007 71 APPENDIX B-TABLE 1 APART149M RENTAL RATE COMPARABLES IN-LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Year Zip Budtl Total Unit Base Name&Address Code Renovated Units Type Rent SF/Unit $/SF 1 La Quuda Hermosa 92647 1971 94 111 $1 155 725 $1 59 16211 Padmide Lane 2000 211 1405 940 $149 2/1 1415 945 $150 211 1 530 1 110 $1.38 2 Las BnsasA ida Del Mar Apartments 92649 1976 62 1/1 1 170 800 $146 16602 and 16552 Sep Circle 2000 212 1 450 1,2W $121 3 ArdrAone Huntington Beach 92647 1986 152 1/1 113W 725 $179 8945 Riverbend Drive 2000 211 1650 925 $178 4 Huntington Breakers 92648 1985 324 011 1050 450 $Z33 21270 Beach Blvd 2000 1/1 1 305 635 $2.06 1/1 1355 625 W-17 2/2 1615 925 $175 2/2 1655 900 $1.84 2/2 1655 900 $184 5 Los Patos Apartments 92649 1973 71 0/1 1 000 400 $2.50 17172 Bolsa Chin 2004 1/1 1.2W 700 $171 211 1500 1000 $1.50 6 Maddox Apartments 92647 1971 56 ill 1 045 750 $139 7051 Maddox Or 2002 2/1 1 300 980 $1.33 212 1400 1050 $133 7 Ocean Breeze Villas 92647 1975 288 Ill 1 125 718 $1 57 6401 Warner Ave 2000 l/1 1 150 800 $144 211 1225 850 $144 211 1.276 900 $142 22 1450 1100 $132 3/2 1700 1288 $132 312 1750 1440 $1.22 8 Avalon At Pacific Bay 92647 1970 304 1/1 1 195 750 $1 59 6700 Warner Ave 1999 211 1 540 1 000 $1 54 22 1495 1000 $150 9 Huntington Creek 92647 1978 194 0/1 990 505 $196 8211 San Angeto Or 2001 111 1 190 729 $1.63 2115 1 510 1075 $140 Sample Average WAn. Max. Avg. Avg Size Und Size Rent Rent Rent Studios 3 452 $1000 $1100 31000 $226 1-Bedroom Units 11 723 $1 000 $1 400 $1,2W $167 243edroom Units 17 988 $1,200 $1700 $1 500 $1.50 343edroom Units 2 1 364 $1 700 $1 800 $1 700 $127 Source RentNet.com,07/06/05 Prepared by Keyser Marston Associates Inc. Resolution No 2007 71 APPENDIX B-TABLE 2 ,#VFORDABI E RENTS FOR LOW INCOME HOUSEHOLDS EU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA One-Bedroom Two-Bedrooms Units Units' I taw income income G 60%County Median 2 $36 340 $40 880 %of Income Allotted to Housing 3 30 O'A 30 0% Monttity Housing Expenses $909 $1 022 (Less)Utilities Expenses 4 (32) (40) M Rent $877 $982 ' Based on the 2005 Orange County median incomes provided by HCD Per the requirements imposed by California Health and Safety Code Section 50053 the household size is set at two persons for one-bedroom units and three persons for two-bedroom units 2 Based on the 2006 Orange County median incomes provided by HCD and the requirements imposed by California Health and Safety Code Section 50053 3 Based on the City Ordinance 4 Based on the cement Orange County utility allowances Includes gas and electricity Prepared by, Keyser Marston Associates ioc, Resolution No 2007 71 APPENDIX B-TABLE 3 PROJECT VALUE-100%MARKET RATE UNITS RENTAL PROTOTYPE IN-LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA L Rental Income One-Bedroom' 25 Units $1 443 /EJmt $433 000 Two-Bedrooms 2 25 Units $1 729 JUnit 518 800 Miscellaneous Income 50 Units $15 00 /Unit 9 000 Gross Income $960 800 (Less)Val Allowance 5 0%of Gross Income (48 000) Effective Gross Income $912,800 If Operabnn Expenses General Operating Expenses 50 Units $3 800 1Und ($190 000) Property Taxes 3 50 Units $2 201 Akid (110 000) Operating&Capital Reserves 50 Units $250 /Unit (12 500) Total Operating Expenses ($312 500) � III Net Operating Income $600 300 Per Unit $12,000 IV 1projectvalue 4 $10 005 000 Per Unit $200 000 Assumes one-bedroom units at 750 square feet and rent at$1 92/sf ` Assumes two-bedroom units at 1 000 square feet and rent at$1 73/sf 3 The value is projected based on a 6 0°/a capitalization rate The property tax rate is set at 1 10%of value. '6 The value is projected based on a 6 01/6 capitalization fate Prenared by- Kevser Marston Associates Inc Resolution No 2007 71 APPENDIX B-TABLE 4 P—`,JECT VALUE-100%LOW INCOME UNITS CAL PROTOTYPE IN-LIEU FEE ANALYSIS HUNTINGTON BEACH CAUFORNIA I Rental Income One-Bedro m 25 Units $877 /Und $263100 Two-Bedrooms 25 Units $982 /Unit 294 600 Miscellaneous Income 50 Units $15 00 /Unit 9 000 Gross Income $566 700 (Less)Vacancy Allowance 5 0% of Gross Income (28 300) Effective Gross income $538 400 11 Operating Expenses General Operating Expenses 50 Units $3 800 /Und ($190 000) Property Taxes 2 50 Units $1 041 JUntt (52,000) Operatng 8 Capital Reserves 50 Units $250 /Unit (12 500) Total Operating Expenses ($254,500) t rift- Net Operating Income $283 900 Per Unit $5 700 IV JProjectValue 3 $4 732,000 Per Unit $95,000 See APPENDIX B-TABLE 2 2 The value is protected based on a 6 0°/a capitalization rate The property tax rate is set at 1 10%of value ' The value is projected based on a 6 00/9 capitalization rate f Prepared by- Keyser Marston Associates Inc, Resolution No 2007 71 APPENDIX B-TABLE 5 AFFOR13ABU.W GAP CALCULATION-RENTAL PROJECTS IN-LIEU FEE ANALYSIS HUNTINGTON BEACH,CALIFORNIA Net Operating Project Affordability I Affordabditir Gap Income Value Gap Low Income Gap/Unit Market Rate Scenana $12 000 $200 000 Low income Scenano 2 $5 700 $95 000 AtfordabnGty Gap/Unit $105,000 it Affordabdity Gals 1 Total Unit Calculation AtfordablTrty Gap/Affordable Unit $105 000 Affordable Units as a%of Total Units 10°A lAffordability Cap/Total Unit $10,500 See APPENDIX B-TABLE 3 2 See APPENDIX B-TABLE 4 Prepared by- Keyser Marston Associates Inc Resolution No 2007 71 APPENDIX C IN-LIEU FEE CALCULATION 3 Resolution No 2007 71 APPENDIX C-TABLE 1 SMALL PROJECT ANALYSIS IN-LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Prototype Project L Protected Sales Revenues' #of Units Sales Prices Total Revenue One-bedroom Units 5 $343 600 $1 718 000 Two-bedroom Units 5 559 700 Z799 000 Three-bedroom Units 20 918 600 18 372,000 Total Project Revenue 30 $76Z967 $22 889 000 if Land+Construction Costs $649 000 ]Unit $19 456 000 III DeveWer Profit Total I S% Sates Revenues $3 433 000 Per Unit $114 000 Small Project #of Units Sales Prices Total Revenue I Protected Sales Revenues' One-bedroom Units 2 $343 600 $687 000 Two-bedroom Units 2 559 700 1 119 000 Three-bedroom Units 5 918 600 450000 Dotal Project Revenue 9 $711000 $6 399 000 41 land+Constnietion Costs $649 000 /Unit $5 841 000 Ill Developer Profit Total $558 000 Profit Per Unit $62 000 Profit Differential Per Und $52,001 %Difference 46% ' See APPENDIX A-TABLE 3 2 Based on stabilized return on total investment PrP.r a bv' Keyser Marston Associates Inc. Resolution No 2007 71 APPENDIX C-TABLE 2 2 s IN41EEU FEE SUtI AARY ill U FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA L Base In4ieu Fee /Total Unit 1Sf GBA 2005 In-Lieu Fee Ownership Projects W 700 ' $24 Z 2005 In4.ieu Fee-Rental Projects $10 SW 3 $12 4 p Base In41eu Fee for Small Prolgoa Ownership Rental Base In-lieu Fee $24 $12 Loss in Profit s 46% 46% Base In4teu Fee for Small Projects $13 $7 ltl Sliding Scale as a%of the Base In-lieu Fee Owners ip Rental Three Unit Proec is 5rA 57% Four Unit Projects g4°/, 64% Five Unit Projects 71% 71% Sac Unit Projects 790A 79% Seven Unit Projects 92% 92% Eight Unit Projects 00/4 930A Nine Unit Projects 100% 100% 05 Sliding Scale In lieu Fee Ownership Rental -Ahree Unit Protects $7 $4 Four Unit Prgects $8 $4 Five Unit Projects $9 $5 Six Unit Projects $10 $6 Seven Unit Protects $12 $6 Fight Unit Projects $12 $7 Nine Unit Projects $13 $7 ' See APPENDIX A-TABLE 3 2 Assumes that the units averag e 1800 square feet in sae 3 See APPENDIX B-TABLE 5 4 Assumes that the units average 875 square feet in size s See APPENDIX C-TABLE 1 Piepaied by- Keyser Marston Associates Inc_ Resolution No 2007 71 'L KEYSER I\URSTON ASSOCI FI ES ADVISORS IN PUBLIC/PRIVATE REAL ESTATE DEVELOPMENT MEMORANDUM ADVISORS IN To Mary Beth Broeren Principal Planner REAL ESTATE REDEVELOPMENT City of Huntington Beach A FORDABLE HOUSING ECONOMIC DEVELOPMENT From Kathleen Head SAN FRANCISCO A JERRY KEYSER TIMOTHYC KELLY Date April 9 2007 KATE EARLE FUNK DEBBIE M KERN ROBERT J WETMORE Subject inclusionary Housing Ordinance- In-Lieu Fee Update CSAN-ELE CALVIN E HOLLIS 11 KATFILEEN H HEAD JAMCSA RAGE In a memorandum dated January 23 2006, Keyser Marston Associates inc (KMA) PAUL C ANDERSON recommended an in-lieu fee schedule for residential projects with nine or fewer units that ) D Soo HDO KIVIY N E ENGSTROM are subject to the City of Huntington Beach(City)Inclusionary Housing Ordinance l KEVI JULIE L ROMEY (Ordinance) The recommended schedule is presented in the following table SA DIE(,O GERALD M TRIMBLE Project Size Ownership Rental PAULC MARRA Three Units $7 $4 Four Units $8 $4 Five Units $9 $5 Six Units $10 $6 Seven Units $12 $6 Eight Units $12 $7 Nine Units $13 $7 The KMA analysis also recommended that the City create a mechanism for re-evaluating the in lieu fee amount on a periodic basis The periodic adjustment is intended to keep the fee amount in sync with changes in new housing prices it is the KMA recommendation that the City apply an adjustment factor tied to the annual change in new home prices in Orange County This information is published by the Real Estate Research Council of Southern California in a quarterly report titled Real Estate and Construction Report' 'The information source is Data Quick Information Systems The original data are taken from county records and the prices are calculated from the documentary transfer tax Adjustments are made to remove very high-end and very low-end sales 500 SOUTH GRAND AVENUE SUITE 1480 LOS ANGELES CALIFORN]A 90071 PHONE 213 622 8095 FAX 213 622 5204 0704009 doc HT6 KHH gbd WWbV KEYSERMARSTON COM 14066 0041014 Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach Apnl 9 2007 Subject:. lnclusionary Housing Ordinance-In-Lieu Fee Update Page 2 KMA used the fourth quarter reports for 2006 and 2005 to derive the percentage change in Orange County safes prices for new homes That information indicates that the median price in December 2005 was$707 500 and the median price in December 2006 was $792 000 This represents an 11 94% increase If this increase is applied to the fee schedule recommended by KMA in January 2006 the resulting schedule for 2007 is as follows 2007 In-Lieu Fee Schedule Project Size Ownership Rental Three Units $8 28 $4 48 Four Units $9 29 $5 04 Five Units $10 41 $5 60 Six Units $11 42 $6 16 Seven Units $13 32 $7 16 Eight Units $13 54 $7 28 Nine Units $14 55 $7 84 � 1 0704009 doc HTB KHH gbd 14066 004/014 Resolution No 2007 71 APPENDIX C TABLE 2 2005 IN LIEU FEE SUMMARY IN LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Total Fee Per I Base In lieu Fee Unit 2005 In Lieu Fee Ownership Projects $43 700 2005 In Lieu Fee Rental Projects $10 500 2 Average Fee Per Unit $27 100 If Base In lieu Fee for Small Protects Base in-lieu Fee $27 100 Loss in Profit 3 46% Base ln41eu Fee for Small Projects $14 739 III Sliding Scale as a%of the Base In lieu Fee Three Unit Projects 57% Four Unit Projects 64% Five Unit Projects 71% Six Unit Projects 79% Seven Unit Projects 92% Eight Unit Projects 93% Nine Unit Projects 100% 2007 Update IV 2005 Sliding Scale In lieu Fee 11 94% Three Unit Projects $8 420 $9 430 Four Unit Projects $9 450 $10 580 Five Unit Projects $10 510 $11 760 Six Unit Projects $11 580 $12 960 Seven Unit Projects $13 530 $15 150 Eight Unit Projects $13 690 $15 320 Nine Unit Projects $14 740 $16 500 See APPENDIX A TABLE 3 2 See APPENDIX B TABLE 5 3 See APPENDIX C TABLE 1 Prepared by Keyser Marston Associates Inc File name In lieu 08 21 07.x1s APPX C T2 Resolution No 2007 71 A:j KEYSER MARS,TONO AT ADDISCUS IN I IM I(/I It IVA I I RtAI FSTAYF f)FbFi()IMINr MEMORANDUM Af)V1St7RS IN RIM FSlAff R1 ouvttof mu,I To Mary Beth Broeren Principal Planner Af FORDARI,tiOlISIM City of Huntington Beach R ONOMR DI VI IONSALN7 SAN FRANC15CO From Kathleen Head k It RxY KbSEu I lh{onfi t KF41S "Tr FAW Funk, Date October 1 2007 DUN[kS KfKN f2(y13 u i Wt 1 mom 1t)5 AN( MSSubject Inclusionary Housing In Lieu Fee Calculation Methodology C,ALVIN F Ik>ILIS Il IAmutvH IIIA0 JARAIS t W( IW1( ANDIRSO, In a memorandum dated January 23 2006 Keyser Marston Associates Inc (KMA) `IlItok'1) Soo I""' recommended in lieu fee schedules for residential projects with nine or fewer units that SAN L)IEt o are subject to the City of Huntington Beach (City) Inclusionary Housing Ordinance t MAtUM 110%114tl (Ordinance) In a memorandum dated April 9 2007 KMA updated the recommended IAUI C PINARa fee schedules to reflect the percentage change in the median price for new homes in Orange County exhibited between December 2005 and December 2006 The fee schedule recommended in the April 9 2007 analysis is presented in the following table 2007 In Lieu Fee Schedule Fee Calculated Per Square Foot of Building Area in the Project Base Fee/Sq Ft $27 $13 Project Size Ownership Rental Three Units $8 28 $4 48 Four Units $9 29 $5 04 Five Units $10 41 $5 60 Six Units $11 42 $6 16 Seven Units $13 32 $7 16 Eight Units $13 54 $7 28 Nine Units $14 55 $7 84 500 SOUTH CRAND AVENUE SU TL 1480> LOS ANC£LCS CALIFORNIA 90071 > PHONE 213 622 8095 > FAX 213 622 5204 0709027L HTB KHH gbd WWW KFYSFRMARSTON COM 14066 004/014 Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach October 1 2007 Subject Inclusionary Housing In Lieu Fee Calculation Methodology Page 2 PROPOSED MODIFICATIONS TO THE CALCULATION METHODOLOGY In a workshop held on July 30 2007 the Ad Hoc Ci ty Council Committee on Affordable Housing In Lieu Fees (In Lieu Fee Committee) requested that the in lieu fee calculation methodology be modified as follows 1 The in lieu fee should be calculated based on the number of units in the project rather than on the building area in the project 2 The in lieu fee should not vary between ownership and rental projects 3 The base year in lieu fee should be set at the average of the fee amount derived for ownership and rental projects The in lieu fee schedule identified in the January 2006 KMA analysis was based on a scale with uneven increases unit by unit between three and nine units At the City s request the currently recommended fee schedule increases the fee on a pro rata basis The in lieu fees calculations resulting from the Ad Hoc City Council Committee and City staff direction are provided in Table 1 and can be summarized as follows 2007 In Lieu Fee Schedule Fee Calculated Per Unit in the Project Base Fee/ Unit $30 337 Proiect Size Fee/ Unit Total Fee Three Units $9 430 $28 290 Four Units $10 600 $42 400 Five Units $11 780 $58 900 Six Units $12 960 $77 760 Seven Units $14 140 $98 980 Eight Units $15 330 $122 640 Nine Units $16 500 $148 500 The KMA analysis recommended that the City adjust the fee amount annually based on the annual change in new home prices in Orange County This information is published by the Real Estate Research Council of Southern California in a quarterly report titled Real Estate and Construction Report' It is the KMA assumption that this adjustment methodology will be included in the in lieu fee regulations The information source is Data Quick Information Systems The original data are taken from county records and the prices are calculated from the documentary transfer tax Adjustments are made to remove very high end and very low end sales 0709027 HB KHH gbd 14066 004 014 Resolution No 2007 71 To Mary Beth Broeren City of Huntington Beach October 1 2007 Subject Inclusionary Housing In Lieu Fee Calculation Methodology Page 3 FINDINGS The City s primary objectives in providing an in lieu fee option in the Ordinance is to establish an fee schedule that meets the following criteria 1 The funds should be sufficient to allow the City to produce the number of inclusionary units that would have bee n required within the project that has been allowed to pay the in lieu fee 2 The in lieu fee schedule should be set at amounts that do not render small projects economically infeasible It should be recognized that the currently proposed in lieu fee schedule will be insufficient to produce the inclusionary units in similar locations and product types to the market rate ownership units being developed However the establishment of an in lieu fee schedule requires the City to make several subjective judgments and decisions To that end KMA considered the following factors 1 The primary purpose of the Ordinance is to attract good quality affordable housing units to the community There is no stated objective to provide low and moderate income households with luxury housing units 2 New ownership housing units in Huntington Beach are commonly selling for prices in excess of$1 0 million It may be considered financially inefficient to provide affordable housing for moderate income households at that market price range 3 The potential exists to create a diverse mix of affordable housing on a more cost efficient basis in rental units and/or in infill locations As such the currently proposed in-lieu fee schedule may provide sufficient revenues to produce the requisite number of inclusionary units in off site locations It is the KMA opinion that the currently proposed in lieu fee schedule balances the objectives to attract affordable housing units whd a limiting the in lieu fee to amounts that can be supported by small projects If the City wishes to allow projects with more than nine units to pay a fee in lieu of producing the required affordable units it would be appropriate to use the Base Fee identified in the schedule to calculate the applicable in lieu fee amount 0709027 HB KHH gbd 14066 004 014 Resolution No 2007 71 TABLE 1 2005 IN LIEU FEE SUMMARY IN LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Average Unit Size Fee/Sq Ft I Base In lieu Fee(2005) (Sq Ft) Building Area Fee/Unit Ownership Projects 1 800 $24 $43 700 Rental Projects 875 $12 $10 500 Average Fee Per Unit $27 100 II Base In lieu Fee for Small Proiects Base In lieu Fee $27 100 Loss in Profit 1 46% Base In lieu Fee for Small Projects $14 739 III Sliding Scale as a%of the Base In lieu Fee 2 3 Unit Projects 57% 4 Unit Projects 64% 5 Unit Projects 71% 6 Unit Projects 79% 7 Unit Projects 86% 8 Unit Projects 93% 9 Unit Projects 100% Fee/Unit Total Fee 2005 Data 2007 Update IV Sliding Scale In lieu Fee 11 94% 3 3 Unit Projects $8 420 $9 430 $28 290 4 Unit Projects $9 470 $10 600 $42 400 5 Unit Projects $10 520 $11 780 $58 900 6 Unit Projects $11 580 $12 960 $77 760 7 Unit Projects $12 630 $14 140 $98 980 8 Unit Projects $13 690 $15 330 $122 640 9 Unit Projects $14 740 $16 500 $148 500 Based on KMA analysis dated January 23 2006 The three unit and nine unit fee amounts are based on the January 23 2006 analysis The sliding scale has been adjusted 2 to provide pro rata increases on a unit by unit basis 3 Based on the percentage change in the median price for new homes in Orange County between December 2005 and December 2006 The medians were$707 500 and$792 000 respectively The source is the Real Estate and Construction Report published by the Real Estate Research Council of Southern California Prepared by Keyser Marston Associates Inc File name In lieu 10 01 07 Table 1 Res No 2007-71 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss CITY OF HUNTINGTON BEACH ) I JOAN L FLYNN the duly elected qualified City Clerk of the City of Huntington Beach and ex-officio Clerk of the City Council of said City do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on October 15, 2007 by the following vote AYES Bohr Carchio Cook Coerper Green Hansen Hardy NOES None ABSENT None ABSTAIN None -Q04.1M) CLI Clerk and ex-office Jerk of the City Council of the City of Huntington Beach California ATTACHMENT #2 1 KEYSER MARSTON ASSOCYATES ®�9ZADVISORS IN PUBLIC/PRIVATE REAL ESTATE DEVELOPMENT aBID � 4�� MEMORANDUM l01 b. ADVISORS IN REAL ESTATE To Mary Beth Broeren Principal Planner REDEVELOPMENT City of Huntington Beach WfORDABLE HOUSING 40MIC DEVELOPMENT From Kathleen Head SAN FRANCISCD A JERRY KEMK Julie Romey TIMOTHY C KEILY KATE EARLS FUNK DEBBIE M.KERN Date January 23 2006 R{OBERT) WETMORE LOSA4GELES Subject. Inclusionary Housing Ordinance- InAieu Fee CALVIN E HOLUS 11 KATHLEEN H HEAD JAMES A RAGE PAULC ANDERSON At our request Keyser Marston Associates Inc KMA eared the following analysis atEGoRY o Soo-Hoo Y Y )prepared 9 Y pertaining to the City of Huntington Beach(City) Inclusionary Housing Ordinance �""DID GERALD M.TRJMBCE (Ordinance) Specifically, KMA evaluated the Ordinance provision that allows PAUL C.MARRA developers of protects with nine or fewer units to pay a fee in lieu of providing affordable housing units within their protect The purpose of the following memorandum is to assist the City in establishing an in-lieu fee payment schedule to be applied to small projects INC!_USIONARY HOUSING ORDINANCE REQUIREMENTS The Ordinance requirements that must be considered in establishing an in-lieu fee schedule are 9 All for-sale and rental new construction housing projects with three or more units must make at least 10% of the units available to the following households I a Far-sale units must be made available to very-low low or median income households 2 b Rental units must be made available to very-low or low income households ' New residential projects are defined as an entirely new project or new units added to an existing project Only new units are used to calculate the required number of affordable housing units 2 The median is defined as the Orange County median income(Median) SW SOUTH GRAND AVENUE SUITE 1480> LOS ANGELES CALIFoRNIA 90071 > PHONE_213 622 8095 > FAX.213 622 5204 0507026 HS OQWJLRgLd W W W KEYSERMARSTON COM 14066A04 012 l y TO Mary Beth Broeren City of Huntington Beach January 23,2006 Subject Inclusionary Housing Ordinance-In-Lieu Fee Page 2 2 The income and affordability covenants must remain in place for at least 60 years 3 The affordable units must be a Dispersed throughout the project; b Proportional in number bedroom size and location to the market rate units c Comparable with the market rate units in terms of the base design, appearance materials and finish quality and d Constructed and occupied concurrently with, or prior to the construction and occupancy of market rate units 4 For small projects defined as projects including nine or fewer units,the inciusionary housing requirements may be satisfied by payment of an in-lieu fee established by resolution of the City Council and updated annually-3 a The in-heu fees will be deposited into a dedicated affordable housing account b The account will only be used to provide funding assistance for construction or retention of affordable housing and for reasonable administration costs 5 Developers may choose to provide the affordable units at an off-site location as long as these units are under the full control of the Developer or other approved party The following outlines the other conditions a Off-site projects can be new construction or major physical rehabilitation of existing non-restricted units At risk units and mobile homes may also be used to satisfy this requirement_ b Off-site units must be constructed or rehabilitated prior to or concurrently with the primary project 3 The fees are to be based upon the total number and size of the new residential units 050702&H6-KM .fM0d 94066.004012 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject_ Inclusionary Housing Ordinance-In-L wu Pee Page 3 c The sales prices or rents must be affordable to very4ow, low or median income households pursuant to the terms of an Affordable Housing Agreement METHODOLOGY The vast majority of new residential projects within Huntington Beach are expected to be comprised of'for sale"projects However it is possible that rental development may also occur Recognizing that the project economics vary between ownership and rental projects and to avoid imposing onerous requirements on development,the KMA analysis evaluates both development types The first step in establishing an in-lieu fee is to quantify the financial impact associated with fulfilling the affordable housing requirements within market rate projects That financial impact is equal to the difference between the market rate prices and the affordable price for the required income restricted units This difference is known as the "affordability gape and it is quantified using the following methodology 1 The projected market rate sales prices and rents are compiled for prospective new residential projects 2 The maximum affordable prices and rents are calculated based on the standards imposed by California Health and Safety Code (Code)Sections 50052 5 and Section 50053 3 The difference between the market rate price and the defined affordable price represents the affordability gap associated with each income restricted unit required to be included in a market rate residential project 4 The affordability gap per income restricted unit is multiplied tomes the number of units that must be income restricted This represents the effective cost to a developer of fulfilling the inclusionary housing requirements on-site 5 Since a fee is going to be paid m-lieu of providing any affordable units on-site the effective cost is divided by the total square footage of the project This represents the Base In-Lieu Pee amount 6 The Ordinance limits the in-lieu fee option to projects with nine or fewer units The in-lieu fee analysis recognizes that the inclusionary requirement has a greater impact on smaller projects than it does for a typically sized project To Mary Seth Sroeren City of Huntington Beach January 23, 2006 Subject. Inclusionary Housing Ordinance-In-Lieu Fee Page 4 7 The Small Project in-lieu fee reflects the number of units in the project which can range between three and nine units To achieve this, it is necessary to create a Sliding Scale In-Lieu Fee amount that can be justified based on both the affordability gap and the feasibility analysis for the three-to nine-unit projects Household Incomes The Ordinance specifically identifies the Code Section 50093 income definition for moderate income households However,the Ordinance limits the moderate income category to 100%of the Median instead of the 1209/o of Median maximum that is allowed by Section 50093 The Ordinance also imposes very-low and low income restrictions To account for these requirements KMA assumed that Code Section 50105 would apply for very-low income households and that Code Section 50079 5 would apply for low income households The income information is published by the State of California Housing and Community Development Department(HCD) annually The income ranges for Orange County in 2005 are Very-tow Low Median Household Income Income Income Size (Section 50105) (Section 50079 5) Section 50093 1 Person $0-$26 900 $26 900-$43 000 $43,000-$53,000 2 Person $0-$30 700 $30 700- $49150 $49,150-$60 550 3 Person $0-$34,550 $34,550-$55 300 $55,300-$68150 4 Person $0-$38,400 $38 400-$61,450 $61450-$75,700 5 Person $0-$41,450 $41,450-$66,350 $66 350-$81,750 6 Person $0-$44,550 $44,550-$71 250 $71,250-$87 800 7 Person $0-$47,600 $47 600- $76,200 $76,200- $93,850 8 Person $0-$50 700 $50,700- $81 100 $81 100-$99 900 Affordable Housing Cost Calculation Methodology The Ordinance does not identify a methodology for calculating affordable housing cost_ However historically the City has used the calculation methodologies imposed by the California Health and Safety Code Section 50053 defines the calculation methodology for rental units and Section 50052 5 provides the methodology for ownership units 0567026 HRXHtQLRgbd 140MOO4 012 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Inclusionary Housing Ordinance-In-Lieu Fee Page 5 AFFORDABILITY GAP ANALYSIS—OWNERSHIP PROJECTS(APPENDIX A) Market Rate Sales Paces Hanleywood Market Intelligence information indicates that the following single-family detached and attached residential projects are currently selling or recently sold out in Huntington Beach Year Product Number Built Sold Out Type of Units Seabndge Villas 4 2003 2004 Condos 344 Bel Air 2004 --- Duplex 102 Peninsula Point 2004 — Detached 13 Sea Cove 2004 --- Townhomes 106 Total Units 565 As shown in Appendix A—Table 1,the following summarizes the sales prices for each product type Average Average Unit Size Sales Average (Sf) Prices $/Sf One-bedroom Units 811 $348,500 $430 Two-bedroom Units 1 418 $567,000 $400 Three-bedroom Units 2,484 $923 800 $367 Averages 1 841 $854 000 $464 Pricing Assumptions The market rate sales prices are based on the following assumptions Unit Size Sales (Sf) $!Sf Prices One-bedroom Units 800 $430 $343,600 Two-bedroom Units 1 400 $400 $559 700 Three-bedroom Units 2 500 $367 $918 600 4 The project was bust in the 1980 s and was converted from apartments to condominiums in 2003 0507026 HB MR JLR.gbd 14066.004 012 To Mary Beth Broeren,City of Huntington Beach January 23,2006 Subject. Inclusionary Housing Ordinance- In-Lieu Fee Page 6 Affordable Housing Cost Calculation The affordable housing cost calculations included in the Code Section 50052 5 definition are 1 The household incomes are based on a benchmark household size equal to one person more than the number of bedrooms 2 The Ordinance sets the maximum household income for moderate income units at 100%of the Medan as published by HCD 5 3 Thirty--five percent(35%)of the defined household income is allocated to housing related expenses These expenses are defined as mortgage debt service payments property taxes, maintenance costs, insurance costs,home owner's association (HOA)dues and utility costs The Huntington Beach Redevelopment Agency(Agency) has historically calculated these costs for the City using the following assumptions a Typically the Agency estimates HOA fees, inclusive of homeowner's - insurance,based on the actual HOA fees for a project Therefore, KMA estimated the HOA fees by calculating the weighted average of the project comparables in Appendix A—Table 1 b The maintenance costs are estimated at$50 per month c The 2005 utility allowances are provided by the Orange County Housing Authority and include gas electricity, trash and water expenses These costs are as follows One-bedroom Units $71 Two-bedroom Units $82 Three-bedroom Units $115 d In accordance with the Agency's methodology the property tax cost is estimated at 1 08% of the projected affordable price for the units 4 The mortgage amount that can be supported by a Median income household is based on a 30-year fully amortizing mortgage at 6 5%interest rate 6 s It is reasonable to assume that given a choice a developer will provide Median income ownership units rather than very-low or low income ownership units oWIM HS wntA.R&d 140MW4 012 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Inclustonary Housing Ordinance-In-Lieu Fee Page 7 Assuming the home buyer makes a down payment equal to 10%of the affordable purchase pnce the affordable pncces for the Median income units in 2005 are One-Bedroom Two-Bedroom Three-Bedroom Units Units Units Supportable Mortgage $188 500 $217,800 $242,800 Home Buyer Down Payment 20 900 24,100 27,000 Affordable Purchase Pnce $209 400 $241,900 $269,800 Affordability Gap Calculations The results of the affordability gap analysis for Median income households am presented in Appendix A—Table 3 The analysts identifies the gaps between the maximum affordable prices and the protected market rate sales prices for one- two-and three-bedroom units the results are summarized below One- Two- Three- Bedroom Bedroom Bedroom Units Units Units Market Sales Prices $343 600 $559,700 $918 600 (Less) Median Income Sales Prices (209 400) (241,900) 269,800 Affordability Gap $134 200 $317 800 $648 800 For the purposes of this analysis, KMA distributed the units as follows 25°/one bedrooms, 25%two bedrooms and 501%three bedrooms Based on these assumptions the average affordability gap per Median income unit is estimated at $437 400 Inclusionary Housing Obligation Cost The Ordinance requires developers to impose income and affordability restnctions on at least 10% of the units in an ownership project It is the KMA assumption that developers would typically minimize the financial gap by earmarking the units for Median income households rather than for very-low or low income households When the$437 400 gap per affordable unit is distnbuted across all units in a project the cost is equal to $43 700 per unit($437 400 x 10%=$43 700) 6 The level annual debt service amount on a loan at 6 5%interest is equal to 7 58%multiplied fames the onginal balance on the first trust deed mortgage 0507026-H&KM nszgbw 14066004012 To: Lary Beth Broeren City of Huntington Beach January 23 2006 Subject Inclusionary Housing Ordinance-ln-Lieu Fee Page 8 AFFORDABILITY GAP ANALYSIS—RENTAL PROJECTS{APPENDIX B) The methodology used in the KMA affordability gap analysis for rental developments can be described as follows 1 KMA obtained rents for recently renovated market rate apartment complexes in Huntington Beach from www rentnet corn 2 KMA calculated the maximum affordable rents for low income households based on the household income statistics distributed by HC® and the affordability standards imposed by Code Section 50053' 3 To maximize management efficiency, new apartment projects typically include at least 50 units 8 For the purposes of this analysis,KMA created a 50-unit prototype apartment project, and estimated the affordability gap associated with the imposition of low income rents on 10% of the units The affordability gap was then translated into the value reduction generated by the income and affordability restrictions imposed by the Ordinance 4 The Ordinance does not allow projects with more than nine units to pay the in- lieu fee However given the dearth of small new apartment projects it is necessary to premise the affordability gap analysis on a larger project The gap derived from this analysis is then adjusted to reflect the characteristics associated with a project that would qualify for the in-lieu fee payment option The tables that detail the rental analysis are located in Appendix B and are organized as follows Table 1 Apartment Rental Rate Comparables Table 2 Affordable Rent for Low Income Households Table 3 Project Value—100% Market Rate Units Table 4 Project Value—100% Low Income Units Table 5 Affordability Gap Calculation—Rental Projects 7 KMA assumed that developers will choose to provide low income units rather than very-low income units "Small investors will sometimes develop a smaller project to holdover the long-term However, m the current market place it is far more financially advantageous to build a small condominium project rather than a small apartment project os 7M- KHHA _gbe 14OW004 012 To Mary Beth Broeren,City of Huntington Beach January 23 2006 Subject- lnclusionary Housing Ordinance-In-Ueu Fee Page 9 Market hate Rents The vast majority of the recently constructed apartment protects in Huntington Beach have been subject to long-term income and affordability restrictions Given the lack of new rental development, KMA gathered rent comparables for apartment buildings that have been renovated since 2000 The following illustrates the average asking rents for recently rehabilitated apartment units in Huntington Beach Unit Size Monthly Unit T (Sf) Rents $1Sf Studio Units 452 $1 000 $2 26 One-bedroom Units 723 $1 200 $1 67 Two-bedroom Units 988 $1 500 $1 50 Three-bedroom Units 1 364 $1 700 $1 27 Based on the current market and development trends KMA assumed that a typical apartment project would be focused on one-and two-bedroom units Assuming a 15% premium for new construction the projected market rents for a new apartment project are as follows Unit Size Monthly Unit Type (Sf) $ISf Rents One-bedroom Units 750 $1 92 $1,443 Two-bedroom Units 1,000 $1 73 $1 729 Affordable Housing Rent Calculations The Ordinance requires 10%of the units in a rental development to be subject to very- low or low income and affordability restrictions Historically the City has applied the Code Section 50053 affordable housing cost definition to the incusionary housing rental units The calculations are presented in Appendix B—Table 2, and the results can be summarized as follows 1 The household incomes are based on benchmark household sizes of two persons for one-bedroom units and three persons for two-bedroom units 2 The household income is set at 60%of the Median for low income units 3 30% of the defined household income is allocated to housing related expenses 0507026-M KWttJMOd 140WOOCO12 To Mary Beth Broeren,City of Huntington Beach January 23,2006 Subject. Inclusionary Housing Ordinance-In-Lieu Fee Page 10 4 The maximum allowable rent must be adjusted to reflect the fact that the tenants will be required to pay for interior utility costs Based on the 2005 allowances provided by the County of Orange Housing Authority the utilities are estimated at $32 per month for one-bedroom units and $40 per month for two-bedroom units 9 5 The income and affordability covenants must be imposed over at least a 60-year term The maximum allowable 2005 low income rents under the defined income categories are as follows Monthly Unit Type Rents One-bedroom Units $877 Two-bedroom Units $982 As a practical matter,tenants will not be wioljing to pay rent that exceeds the prevailing rate in the market area As such, it is important to estimate the rents that could be achieved by apartments that are not subject to income and affordability restrictions As can be seen in the following table,the projected market rents exceed the maximum affordable rents by 39%to 43% Thus, KMA has applied the defined affordable rents to our affordability gap analysis Market Low Unit Type Efate Income Difference One-bedroom Units $1443 $877 (39%) Two-bedroom Units $1,729 $982 430A Affordability Gap Calculations The affordability gap calculations are presented in Appendix B Table 3 provides a pro forma analysis for a market rate project and Table 4 presents the findings for a low income project The assumptions that were applied to each scenario are 1 The market rate and income restricted rents are based on the assumptions discussed in the preceding section of this analysis 2 The revenue analyses include$15 per unit per month in miscellaneous income and a 5%vacancy and collection allowance 9 Rental utility allowances include gas and electricity expenses only M7026 H81QaH-ARQbQ 14066 ON 012 To Mary Beth Broeren, City of Huntington Beach January 23 2006 Subject. Inclusionary Housing Ordinance- In-lieu Fee Page 11 3 The general operating expenses are estimated at$3 800 per unit and a$250 per unit per year allowance is provided to fund an operating and capital reserve account_ 4 The property tax expense estimates vary among the market rate and income restricted apartment projects The expense cost is equal to the value supported by the project at a 1 1% property tax rate 5 The net operating income(NOI)for both the market rate and income restricted units was capitalized at a 6 WA rate to estimate the relative values supported by market rate and tour income units Based on the preceding assumptions the values per unit are estimated as follows NOI/Unit Value/Unit 100% Market Rate $12 000 $200 000 100% Low Income $5 700 $95 000 Appendix B—Table 5 illustrates the affordability gaps per affordable unit which are summarized as follows Market Rate Scenano ValueAJnit $200 000 (Less)Low Income Value/Und (95 500 Affordability G $105 000 Inclusionary Housing Obligation Cost The Ordinance requires developers to set-aside 10% of the units in a rental project for very-low or low income households Based on the KMA analysis the affordability gap is estimated at an average of$105,000 per income restricted unit included in the project A developer that chooses to pay the in-lieu fee will not be providing any affordable units within their market rate project To translate the weighted average affordability gap into an in-lieu fee payment per market rate unit it is necessary to multiply$105 000 times the 101/6 inciusionary housing requirement This equates to$10 500 per unit development in a market rate project 0507026 He XWixRgbc 14066.004 012 b TO Mary Beth Broeren,Catty of Huntington Beach January 23, 2006 Subject. Inclusionary Housing Ordinance-In-Lieu Fee Page 12 2005 MAXIMUM ALLOWABLE IN-LIEU FEES The City's objective is to establish an in-lieu fee schedule that provides the City with adequate funds to produce the inclusionary units in similar locations and product types However, the primary reason the Ordinance allows projects with nine or fewer units to pay an in-lieu fee is that the City recognizes that the imposition of income and affordability restrictions has a disproportionate impact on small projects Therefore,it is necessary to establish an in-lieu fee schedule that does not render small projects economically infeasible In order to demonstrate the effective cost of fulfilling the Ordinance's production requirements the KMA financial analysis is based on the characteristics embodied by larger projects than would be allowed to pay the in-lieu fee This in turn provides the foundation for creating an in-lieu fee schedule that does not render small development financially infeasible 1 The Base in-Lieu fee is calculated at the 100%estimated affordability gap for a typically sized project 2 Based on the survey data presented in this report the average ownership unit is estimated at 1 800 square feet in size and the average rental unit is estimated at 875 square feet in size 3 The Base In-Lieu fees that correlate to the financial analyses presented in the financial analysts (Base In-Lieu Fees)are as follows Per Per Per Sf of Affordable Market Rate Building Unit Unit Area Ownership Projects $437 400 $43 700 $24 Rental Projects $105 000 $10 500 $12 KMA prepared comparative pro forma analyses of 30-unit and nine-unit"for safe projects to assist in understanding the financial charactenstics of the different project sizes (Appendix C—Table 1) Based on current projections the developer profit per unit is approximately 46% less for the nine-unit project than the projected profit for the 30- unit project To equalize the impact of the Ordinances production requirement for projects with 10 or more units and the in-lieu fee option provided to projects with rune or fewer units KMA reduced the Base to-Lieu Fee by 46°!0 0507026 WMtA.R gbd 140ffi 004 012 1 To. Mary Beth Broeren, City of Huntington Beach January 23,2006 Subject~ tnclusionary Housing Ordinance-In-Lieu Fee Page 13 The resulting fees for nine-unit projects are Per Sf of Building Area Ownership Projects $13 Rental Projects $7 It is important to recognize that the financial impacts grown at a disproportionate rate as the project size decreases To reflect this,KMA created the following sliding scale for three-to nine-und projects 10 Asa% of Small Project Project Size Base Fee Three Units 57% Four Units 64% Five Units 71% Six Units 79% Severe Units 92% Eight Units 9313A Nine Units 1000/0 The in-lieu fees that result frolic the sliding scale are Project Size Ownership Rental Three Units $7 $4 Four Units $8 $4 Five Units $9 $5 Six Units $10 $6 Seven Units $12 $6 Eight Units $12 $7 Nine Units $13 $7 i0 It is difficult to precisely protect the financial impact generated at each protect size The recommended sliding scale percentages are based on the scales currently being applied in West Hollywood and Pasadena_ 0507M HaJ M-RP od 14M6 004 012 To- Mary Beth Broeren, City of Huntington Beach January 23 2006 Subject- lnclusionary Housing Ordinance-In-Lieu Fee Page 14 IN-LIED FEE COMPARISON ANALYSIS To assist the City in setting the in-heu fee payment amount, KMA compiled information from other Southern California jurisdictions that have inclusionary housing requirements, and that allow in-lieu fees to be paid It is important to note,however that the majonty of the surveyed cities calculate the in-lieu fee on a case-by-case basis In addition,many cities require the City Council to provide discretionary approval for a fee to be paid in-heu of producing the affordable units For the surveyed cities that have established fee schedules the in-heu fee is calculated on one of the following bases 1 Per square foot of building area included in the project; 2 Per unit developed in a market rate project, or 3 As a percentage of project or construction valuation The in-lieu fees charged in the surveyed cities are presented in the following tables Per Square Foot of Budd[iqq Area Jurisdiction In-Lieu Fee Amount China $2 72 Duarte $6 50 Pasadena 12 Rental Projects $12—$22 Ownership Projects $5-$41 San Diego 13 $1 25-$2 50 Santa Monica 14 $22-33-$26 08 West Hat ood 1$ $6 70-$13 40 "The in-lieu fee amount is only applicable to projects developed in the Preserve 12 Projects with fewer than 10 units are exempt from the Program 13 The lower fee is charged for projects with fewer than 10 units 14 The lower fee is charged for apartment projects and the higher fee is charged for ownership projects 15 An in-lieu fee can only be paid for projects with 20 or fewer units The fee varies by number of units in the project 05GT0Z&HSXKtnrz9bd 14066004 012 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject Inclustonary Housing Ordinance-In-Lieu Fee Page 15 Per Unit in a Market Rate Pr ect Jurisdiction In-Lieu Fee Amount Agoura Hills $4 541 -$5,277 Laguna Beach 17 $7,047 Coronado $7 000 As a%of Pr ct!Construction Valuation Junsdiction In-Lieu Fee Amount San Clemente 100% San Juan Capistrano 1 00% The in-lieu fees being charged by the surveyed cities vary widely Moreover,since many cities negotiate the in-lieu fee on a case-by-case basis, it is very difficult to identify the "typtcar in-lieu fee being charged by cities that are implementing inclusionary housing programs However, based on the available information,the maximum supportable fee in Huntington Beach is within the range of the fees currently being charged by other Southern California cities IN-LIEU FEE RECOMMENDATIONS The establishment of an in-lieu fee amount requires several subjective judgments and decisions To provide a framework for our recommendations KMA considered the following factors 1 The City s primary objective is to attract sufficient housing to fulfill the affordable housing production requirements imposed by Code Section 33413, and to eliminate the unmet need for affordable housing identified in the Regional Housing Needs Assessment(RHNA) 2 An inclusionary housing production requirement has a greater financial impact on small projects than it does on large projects To mitigate this the provision of an in-lieu fee option is an efficient method of enforcing the Ordnance without stopping the development of smaller projects 16 The tower fee is charged for apartment projects and the higher fee is charged for ownership projects t7 The fee is set at$46 978 per affordable lot or unit 15%of the units are required to be affordable 0W70Z WiQ*tA 0d 14066-OD4 012 To Mary Beth Broeren City of Huntington Beach January 23 2006 Subject. Inclusionary Housing Ordinance-In-Lieu Pee Page 16 The preceding analysis indicates that the affordability gap is $24 per square foot for ownership units and$12 per square foot for rental projects However, A is the KMA conclusion that fees of the this magnitude are likely to render small projects infeasible To balance the City's objective to generate revenues to pursue affordable housing activities against the need to ensure that the in-lieu fee does not result in a constraint to development KMA recommends that the in-lieu fee schedule be set as follows Project Size Ownership Rental Three Units $7 $4 Pour Units $8 $4 Five Units $9 $5 Six Units $10 $6 Seven Units $12 $6 Eight Units $12 $7 Rune Units $13 $7 KMA also offers the following recommendations 1 The City should create a mechanism for re-evaluating the in-lieu fee amount on a periodic basis KMA suggests that the re-evaluation be performed at least every two years so that the in-lieu fee can keep pace with changes in the market place 2 The Ordinance should be amended to provide the following clarifications a The Ordinance should make it clear that developers can fulfill the inclusionary requirements with Median income units for ownership projects and low income units for rental projects b The Ordinance should mandate that the affordable housing cost be calculated in accordance with the Code Section 50052-5 standards for ownership units and Code Section 50053 standards for rental units18*and c The Ordinance should only allow new development and substantial rehabilitation as defined by the Code Section 33413 affordable housing production requirements to full the off-site inclusionary housing option allowed by the Ordinance 18 The City has set 100%of the Median as the maximum income for the moderate income"for sale"units This standard should replace the 110%of the Median applied in the Code Section 50052 5 affordable housing cost calculation 0507M HMK}ptAR*d 1406&004 012 APPENDIX A OWMERSHIP ANALYSIS APPENDIX A-TABLE 1 WW CONSTRUCTION SALES COMPARABLES 244JEU FEE ANALYSIS HUNTINGTON BEACH.CALIFORNIA Fkx plans Year Built! Type Unit #of Unit Base Pso}ect(Ad9dress Sol!Otd HOA Fee Type Units Sue m Price $/St L Seabndge Villas 2003 Condo One-bedroom 72 485 $230 000 $474 Beach Slwd&Adams 2004 $350 One-bedroom 19 760 310 000 408 One-bedroom 83 765 300 000 392 One-bedroom 46 885 360000 407 Two-bedrooms 24 970 335 000 345 Two-bedrooms 59 1095 405 000 370 Two-bedrooms 8 1 100 340 000 309 Two-bedrooms 4 1,240 415 000 335 Two-bedrooms 29 1285 470 000 366 Totals/Averages 344 850 $330 974 $389 IL Bel Air 2004 Duplex Three-bedmoms 28 2 484 $910 000 $366 Gothard&Garfield $276 Three-bedrowns 25 2 497 898 820 360 Three4mdtooms 26 2 555 920 000 360 Three-bedrooms 23 2.636 907 855 344 TabWAverages 102 2.539 $909,365 $358 III Peninsula Point 2004 SFD Three-bedrooms 5 1 990 $869 900 $437 Main Street&Clay $95 Three-bedrooms 7 2174 899 900 414 Three-bedrooms 1 2,260 919,900 407 Tota]WAveracges 13 2110 $80 900 $422 IV Sea Cove 2004 Townhomes One-bedroom 26 1 770 $838.990 $474 PCH&Goldenwest $405 Two-bedrooms 19 1 620 829 990 512 Two-bedrooms 21 1 845 917 990 498 Two-bedrooms 19 2 690 987 990 367 Three-bedrooms 21 2 450 1014 990 414 Totats/Averages 106 2,058 $914 603 $446 V lAttacbed Units 1 Large Projects 562 1 834 $853140 $465 One bedroom 246 811 $348 470 $430 Two-bedrooms 183 1418 $567 019 $400 Three-bedrooms 123 2,524 $927 399 $367 VI IDetached Units/Small Project 13 2,110 $889 900 $422 Three-bedroom Units 13 2110 $889 900 $422 VIE JAII Units 665 1,841 $80,986 $464 One-bedroom 246 811 $348 470 $430 Two-bedrooms 183 1418 $567 019 $400 Three-bedrooms 136 2,484 $923 814 $367 Source Hanleywood Market Intelligence for the City of Huntington Beach Prepared by Keyser Marston Associates Inc Filename in fieu 01 23 06 As APPX A T1 112312006 APPENDIX A-TABLE 2 AFFORDABLE HOUSING PRICES =U FEE ANALYSIS HuNTINGTON BEACH CALIFORNIA One-bedroom Two-bedroom Three-bedroom Units Units Units L Household Income @ 100%of County Medan' $60 550 $68150 $75 700 lI Income Available for Mortaage Debt Service Income Allotted for Housing @ 35%of Income 2 $21.200 $23 900 $26 500 (Less)Ongoing Expenses HOA,Insurance Mardenance 3 (3.792) (3 792) (3 792) twitles 4 (852) (984) (1.380) Property Taxes @ 1 08%of Affordable Price 3 (2 262) (2.603) (Z914) Income Avadable for Mortgage Debt Service $14,294 $16,521 $18 414 III. Maximum Mortgage @ 6 5%Interest Rate 5 $188 500 $217 800 $242.800 IV Home Buyer Down:Payment @ 10%Affordable Pnce 3 $20 900 $24100 $27 000 V jMaxlmum Affordable Home Pnce $209,400 $241 900 $269 80D 1 Based on the 2005 Orange County median incomes provided by HCD Per the requirements unposed by Caffoaua Health and Safety Code Section 50052 5 the household size is set at three persons for hv"edroom uruts and four persons for three-bedroom units The Ordinance limits the moderate income units to households earning 1000/6 of the median. 2 Based on California Health and Safety Code Section 50052 5 3 Based on the Redevelopment Agency's assumptions The Agency calculates the affordable prices for the City 4 Based on the current Orange County utility allowances Includes gas electricity water and trash 5 Based on the current 34-year fixed mortgage rate Prepared by- Keyser Marston Associates Inc Fdenarne In lieu-0123 06xts APPX A T2- 1/23/2006 APPENDIX A-TABLE 3 AFFORDABILITY GAP CALCULATION-OWNERSt*P PROJECTS IN4JEU FEE ANALYSIS HUNTINGTON BEACK CALIFORNIA ' One-bedroorn Tyro-bedroorn Three-bedroom Units Units Units I Affordability Gam Calculation Market Safes Prices' $343 600 $559 700 $918 600 (Less)Maximum Affordable Sates Prices 2 (209 400) (241900) (269 800) AffordatxTity Gap 1 Affordable Unit $134 200 $317,800 $648,800 Affordability Unit Type 11 Average Affordability Gan Calculation Gap Distribution 3 One-bedroom Unit $13$,200 25% Two4)edroom Units $317 800 25% Three-bedroom Units $648 800 500A Average Affordability Gap!Affordable Unit $437,400 III Affordability Gan/Total Unit Calculation Average Affordability Gap J Affordable Unit $437 400 Affordable Units as a%of Total Units 4 100/0 Affordability Gap/Total Unit $43 700 2 Market rate pnces are based on the following 800 sf one-bedroom units @$430/sf 1400 sf two-bedroom units @$4001sf-and 2 500 sf three-bedroom units @$367/sf 2 See APPENDIX A-TABLE 2 3 KMA estimate 4 Based on the City Ordinance Prepared by Keyser Marston Assoaates Inc Fdenarne to Teo 0123 06 As APPX A-T3 9/2312006 r APPENDIX B RENTAL.ANALYSIS } APPENDIX B-TABLE 1 APARTMENT RENTAL RATE COMPARABLES IN-LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Year Zip Built l Total Unit Base Name&Address Code Renovated Units Type Rent SF I Unit $1 SF 1 La Quinta Hermosa 92647 1971 94 1/1 $1 155 726 $159 16211 Pattcside Lane 2000 2h 1405 940 $149 211 1415 945 $1.50 2/1 1530 1110 $138 2 Las BrisaslVda Del Mar Apartments 92649 1976 62 1/1 1 170 8W $146 16602 and 16552 Sell Circle 2000 212 1460 1,200 $121 3 Archstone Huntington Beach 92647 1986 152 1/1 1300 725 $179 8945 Rnrerbend Drive 2000 2(1 1650 925 $178 4 Huntington Breakers 92648 1985 324 0/1 1050 450 $2 33 21270 Beach Blvd 2000 Ill 1305 635 UM 1/1 1355 625 $2.17 212 1615 925 $175 212 1 655 900 $1.84 2/2 1655 900 $184 5 Los Patos Apartments 92649 1973 71 0/1 1 000 400 $2.50 17172 Bolsa Chica 2004 Ill 1,200 700 $1 T1 211 1500 1000 $150 6 Maddox Apartments 92647 1971 56 111 1045 750 $1-39 7051 Maddox Or 2002 211 1 300 980 $1 33 2/2 1400 1050 $1-33 7 Ocean Breeze Villas 92647 1975 288 Ill 1 125 718 $1 57 6401 Warner Ave 2000 1/1 1 150 800 $144 211 1225 850 $144 211 1275 900 $142 ?J2 1450 1100 $132 32 1700 1288 $132 312 1750 1440 $122 8 Avalon At Pacfic Bay 92647 1970 304 1/1 1 195 750 $1 59 6700 Warner Ave 1999 try 1540 1000 $154 22 1495 1000 $150 9 Huntington Creek 92647 1978 194 0/1 990 605 $196 8211 San Angelo Or 2001 111 1 190 729 $163 2115 1 510 1075 $140 Sample Average Min_ Max. Avg. Avg Size Unit Sae Rent Rent Rent $1 _ Studios 3 452 $1000 $1100 $1000 $226 3-Bedroom units 11 723 $1000 $1 4W $1 200 $167 2 Bedroom Units 17 988 $1 200 $1 700 $1 500 $1.50 343edroom Units 2 1 364 $1 700 $1 800 $1 700 $127 Source RentNet com 07/06/05 Prepared by Keyser Marston Associates Inc Filename In Lieu 0123 06)ds APPX B T1 1/2312006 APPENDIX B-TABLE 2 PCPORDABLE RENTS FOR LOW INCOME HOUSEHOLDS IEU FEE ANALYSIS HUNTINGTON BEACH,CALIFORNIA One-Bedroom Twro-Bedrooms Units' Units' I Low-Income Income @_60°!o County Median 2 $36 340 $40 880 %of Income Allotted to Housmg 3 30 0% 30 0% Monthly Housing Expenses $W9 $1 022 (Less)UhTibes Expenses 4 (32) (40) MoinNy Rent $87T $982 ' Based on the 2005 Orange County median incomes provided by HCD Per the requirements imposed by Caldomta Health and Safety Code Section 50053 the household size is set at two persons for one-bedroom units and three persons for tw"edroom units 2 Based on the 2005 Orange County median incomes provided by HCD and the requirements imposed by Califomna Health and Safety Code Section 50053 3 Based on the City Ordinance 4 Based on the current Orange County utility allowances Includes gas and electricity Prepared by Keyser Marston Associates Inc Filename In lieu 0123 06.x1s APPX B T2 1/23/2006 APPENDW B-TA1:3LE 3 PRO.SECT VALUE-'100%MARKET RATE UNITS RENTAL PROTOTYPE IN-LIEU FEE ANALYSIS HUNTINGTON BEACH,CALIFORNIA L Rental Income One-Bedroom' 25 Units $1 443 /Unit $433 000 Two-Bedrooms 2 25 Units $1 729 JUnit 518 800 Miscellaneous Income 50 Units $15 00 JUnit 9 000 Gross Income $960 800 (Less)Vacancy Allowance 5 OOA of Gross Income 08 000) Effective Gross Income $91Z,800 it Operabng Expenses General Operating Expenses 50 Units $3 800 /Unit ($190 000) Property Taxes 3 50 Units $2201 !Unit (110 000) Operating&Capital Reserves 50 Units $250 /Unit (12 500) Total Operabng Expenses ($312 500) P III Net operating Income U00,300 Per Unit $1Z,000 IV Project Value° $10 003 000 Per Unit $200 000 Assumes one-bedroom units at 750 square feet and rent at$1 92/sf ` Assumes two-bedroom units at 1 000 square feet and rent at$1 73 Isf 3 The value is projected based on a 6 0a/a capitalization rate The property tax rate is set at 1 10%of value " The value is projected based on a 6 Oa/o capitalization rate Prepared by- Keyser Marston Associates Inc Filename In lieu-0123 06x1s APPX B-T3 WW006 APPENDIX B-TABLE 4 P`IJECT VALUE—100%LOW INCOME UNITS fAL PROTOTYPE IN—LIEU FEE ANALYSIS HUNTINGTON BEACH,CALIFORNIA L Rental income One-Bedroom' 25 Units $877 /Unit $263100 Two-Bedrooms' 25 Units $982 /Unit 294 600 MisceL-mous Income 50 Units $15 00 /Unit 9 000 Gross income $566 700 (Less)Vamncy Allowance 5 0%of Gross Income (28 300) Effective Gross Income $538 400 11 Operating Expenses General Operating Expenses 50 Units $3 800 /Unit ($190 000) Property Taxes 2 50 Units $1041 /Unit (52,000) Operatng&Capital Reserves 50 Units $250 /Unit (12 500) Total Operating Expenses ($254,500) ten Net Operating Income $283.900 Per Unit $5,700 IV 11'rojectValue' $4 732,000 Per Unit $95,000 See APPENDIX 8-TABLE 2 l The value is projected based on a 6 0%capitalization rate The property tax rate is set at 1 10%of value ' The value is projected based on a 6 0%capitalization rate Prepared by Keyser Marston Associates Inc Filename In lieu 0123 06 x1s APPX B-T4 1/2312006 APPENDIX B-TABLE 5 AFFORDABILITY GAP CALCUf.AT10N-RENTAL PROJECTS IN-LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Net Operating Project Af1•ordaWilsty I Affordability Gan lncorne Value Gap Low lnc ome Gap 1 Unst Market Rate Scenano' $12 000 $200 000 Low income Scenano 2 $5 700 $95 000 Affordability Gag 1 Unit $105,000 It Affordabddy Gap l Total Unit Calculation AffordabiTdy Gap/Affordable Unit $105 000 Affordable Unds as a%of Total Unds 10°A JAMordability Gap!Total Unit $10.500 See APPENDIX B-TABLE 3 2 See APPEND}(B-TABLE 4 4 Prepared by Keyser Marston Associates Inc Filename In lieu-01 23 06 As APPX B-T5 1/2wo06 APPENDIX C IN-LIEU FEE CALCULATION Y APPENDIX C-TABLE 1 SMALL PROJECT ANALYSIS IN-LIEU FEE ANALYSIS HUNTINGTON BEACK CALIFORNIA Prototype Project I Protected Sates Revenues' #of Units Sates Prices Total Revenue One-bedroom Units 5 $343 600 $1 718 o00 Two-bedroom Units 5 559 700 Z799 000 Three-bedroom Units 20 918 600 18 372 000 Total Project Revenue 30 $762 967 $22 889 000 If Land+Construction Costs $649 000 AIM $19 456 000 III Developer Profit Total 15% Sales Revenues $3 433 000 Per Unit $114 000 Small Project #of Units Sales Pnces Total Revenue I Protected Sates Revenues' One-bedroom Units 2 $343 600 $687 000 Two-bedroom Units 2 659 700 1 119 000 Three-bedroom Units 5 918 600 4 593 000 Total Project Revenue 9 $711000 $6 399 000 If Land+Construction Costs $649 000 /Unit $5 841000 III Developer Profit Total $558 000 Profit Per Unit $62 000 Profit Differential Per Unit $52,00 Difference 46% See APPENDIX A-TABLE 3 2 Based on stabilized return on total investment_ Prepared by Keyser Marston Associates Inc. Fitename In lieu 01 23 06xis APPX C T1 lrrV2006 APPENDIX C-TABLE 2 2p"<IN-LIEU FEE SUBWARY II U FEE ANALYSIS HUNTINGTON BEACH,CALIFORNIA I Base In-lieu Fee /Total Unit ISf GBA 2005 In-Lieu Fee-Ownership Projects $43 700 i $24 2 2005 In-Lieu Fee-Rental Projects $10 SW 3 $12 4 It Base Indieu Fee for Small Protects Ownership Rental Base lMieu Fee $24 $12 Loss in Profd s 46% 46% Base In-lieu Fee for Small Projects $13 $7 III Sfitlina Scale as a%of the Base In-lieu Fee Ownership Rental Three Unit Projects 570A 57% Four Unit Projects 64% 64% Five Unit Projects 71% 71% Six Unit Projects 79019 79% Seven Unit Projects 92% 920� Eight Unit Projects 930/a 93% Nine Unit Projects 100% 1000/0 r 2005 Slsdinci Scale In lieu Fee Ownership Rental Three Unit Projects $7 $4 Four Unit Projects $8 $4 Five Unit Projects $9 $5 So(Unit Projects $10 $6 Seven Unit Projects $12 $6 Eight Unit Projects $12 $7 Nine Und Projects $13 $7 ' See APPENDIX A-TABLE 3 2 Assumes that the units average 1 800 square feet in size 3 See APPENDIX B TABLE 5 4 Assumes that the units average 875 square feet in size 5 See APPENDIX C-TABLE 1 Prepared by Keyser Marston Associates Inc- Rename In lieu 0123 06)ds APPX C T2- 1/23/2006 It,NIP, i i t ADVISORS IN PUBLIC/PRIVATE REAL ESTATE DEVELOPMENT MEMORANDUM ADVISORS IN To Mary Beth Broeren Principal Planner REAL ESTATE REDEVELOPMENT City of Huntington Beach AtFORDABLE HOUSING ECONOMIC DEVELOPMENT From Kathleen Head SAN FRANCISCO A JERRY KEYSER TIMOTHYC KELLY Date April 9 2007 KATE EARLE FUNK DEBBIE M KERN ROBERT J WETMORE Subject Inclusionary Housing Ordinance- In-lieu Fee Update CSAN^ELE CALVIN E HOLLIS II KATFILEEN H HEAD JAMCSA BABE In a memorandum dated January 23 2006 Keyser Marston Associates Inc (KMA) PAUL C' ANDERSON recommended an in-lieu fee schedule for residential projects with nine or fewer units that G R D SOO HOO KEVIN E EVGSTRCIµ are subject to the City of Huntington Beach(City) Inclusionary Housing Ordinance LKEVIN JULIE L ROMEY (Ordinance) The recommended schedule is presented in the following table A'DIECO GERAtD M TRIMBLf Project Size Ownership Rental PAUL C MARRA Three Units $7 $4 Four Units $8 $4 Five Units $9 $g Six Units $10 $6 Seven Units $12 $6 Eight Units $12 $7 Nine Units $13 $7 The KMA analysis also recommended that the City create a mechanism for re-evaluating the in lieu fee amount on a periodic basis The periodic adjustment is intended to keep the fee amount in sync with changes in new housing prices It is the KMA recommendation that the City apply an adjustment factor tied to the annual change in new home prices in Orange County This information is published by the Real Estate Research Council of Southern California in a quarterly report titled Real Estate and Construction Report' 1 The information source is Data Quick Information Systems The original data are taken from county records and the prices are calculated from the documentary transfer tax Adjustments are made to remove very high-end and very low-end sales 500 SOUTH GRAND AVENUE SUITE 1480 LOS ANGELES CALIFORNIA 90071 PHONE 213 622 8095 FAX 213 622 5204 0704009 doc HTB KHH gbd WWW KEYS ERMARSTON COM 14066 0041014 To Mary Beth Broeren City of Huntington Beach Apn19 2007 Subject lnclusionary Housing Ordinance-In-Lieu Fee Update Page 2 KMA used the fourth quarter reports for 2006 and 2005 to derive the percentage change in Orange County sales prices for new homes That information indicates that the median price in December 2005 was$707 500 and the median price in December 2006 was$792 000 This represents an 11 94% increase if this increase is applied to the fee schedule recommended by KMA in.January 2006 the resulting schedule for 2007 is as follows 2007 in-Lieu Fee Schedule Project Size Ownership Rental Three Units $8 28 $4 48 Four Units $9 29 $5 04 Five Units $10 41 $5 60 Six Units $11 42 $6 16 Seven Units $13 32 $7 16 Eight Units $13 54 $7 28 Nine Units $14 55 $7 84 0704009 doc HTB KHH gbd 14066 004/014 APPENDIX C TABLE 2 2005 IN LIEU FEE SUMMARY IN LIEU FEE ANALYSIS HUNTINGTON BEACH CALIFORNIA Total Fee Per I Base In lieu Fee Unit 2005 in Lieu Fee Ownership Projects $43 700 2005 In Lieu Fee Rental Projects $10 500 2 Average Fee Per Unit $27 100 11 Base In lieu Fee for Small Protects Base In lieu Fee $27100 Loss in Profit 3 46% Base In lieu Fee for Small Projects $14 739 III Sliding Scale as a%of the Base In lieu Fee Three Unit Projects 57% Four Unit Projects 64% Five Unit Projects 71% Six Unit Projects 79% Seven Unit Projects 92% Eight Unit Projects 93% Nine Unit Projects 100% 2007 Update IV 2005 Sliding Scale In lieu Fee 11 94% Three Unit Projects $8 420 $9 430 Four Unit Projects $9 450 $10 580 Five Unit Projects $10 510 $11 760 Six Unit Projects $11 580 $12 960 Seven Unit Projects $13 530 $15 150 Eight Unit Projects $13 690 $15 320 Nine Unit Projects $14 740 $16 500 1 See APPENDIX A TABLE 3 2 See APPENDIX B TABLE 5 3 See APPENDIX C TABLE 1 Prepared by Keyser Marston Associates Inc File name in lieu 08 2107 As APPX C T2 LATTACHMENT #3 Council/Agency Meeting Held Deferred/Continued to U Approved 0 Conditionally Approved ❑Denied City Clerk s Signature Council Meeting Date May 7 2007 Department ID Number PL07-12 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO HONORABLE MAYOR AND CITY COUNCIL MEMBERS � C SUBMITTED BY PENELOPE CULBRETH-GRAFT, CITY ADMINISTRATOR PREPARED BY SCOTT HESS DIRECTOR OF PLANNIN SUBJECT Adopt Resolution setting forth an Affordable Housing In-Lieu Fee Statement of Issue Funding Source Recommended Action Alternative Action(s) Analysis Environmental Status Attachment(s) Statement of Issue Transmitted for City Council consideration is a resolution that establishes an affordable housing in-lieu fee for new residential protects with three to nine units Payment of the fee is allowed by the City s affordable housing ordinance Staff recommends the City Council approve the resolution because adoption of the in-lieu fee will provide an alternative means for developers of small projects to satisfy the City s inclusionary housing requirements In addition there are three suggested improvements by Keyser Marston Associates to the existing affordable housing ordinance that staff recommends the City Council initiate Funding Source Not applicable Recommended Action STAFF RECOMMENDATION Motion to 1 Adopt Resolution No 2007-29 a resolution setting forth an Affordable Housing In-Lieu Fee as authorized by Zoning & Subdivision Ordinance 3687 Section 230 26 (ATTACHMENT NO 1) 2 "Direct staff to process a zoning text amendment to amend Section 230 26 to incorporate recommendations outlined in the Keyser Marston Associates report dated January 23 2006 (ATTACHMENT NO 2) " REQUEST FOR ACTION (MEETING DATE May 7, 2007 DEPARTMENT ID NUMBER PL07-12 Alternative Action(s) The City Council may make the following alternative motion(s) 1 "Deny the resolution setting forth the Affordable Housing in-Lieu Fee " 2 "Continue the resolution setting forth the Affordable Housing In-Lieu Fee and direct staff accordingly " 3 "Direct staff to include additional changes in the zoning text amendment that would modify the existing affordable housing ordinance " Analysis A PROJECT PROPOSAL Applicant City of Huntington Beach Location Citywide The proposed fee resolution represents a request to establish an in-lieu fee for affordable housing pursuant to Section 230 26 B 4 of the Huntington Beach Zoning and Subdivision Ordinance (ATTACHMENT NO 4) The proposed fee amounts are as follows In-Lieu Fee Per Square Foot Of Habitable Area' Project Size Ownership Rental No of Units Projects Projects Three $8 28 $4 48 Four $9 29 $5 04 Five $10 41 $5 60 Six $11 42 $6 16 Seven $13 32 $7 16 Eight $13 54 $7 28 Nine $14 55 $7 84 Habitable area excludes garage porch decks/balconies Developers of small projects (three to nine units) would have the option of paying the ownership projects fee in lieu of recording a covenant on a unit in their project Similarly, an apartment project developer could pay the rental projects" in-lieu fee Fee revenues would be deposited in a new account called the Housing Trust Fund the uses of the fee are set forth in the resolution and generally include a variety of widely-used financing techniques to assist the development community G iRCAs�2007\PL07 12(Affordable Housing In Lieu Fee)doc 2 4/23/2007 3 49 PM REQUEST FOR ACTION MEETING DATE May 7, 2007 DEPARTMENT ID NUMBER PL07-12 B BACKGROUND The City of Huntington Beach has had an inclusionary housing requirement since the early 1990s, as set forth by policy in October 2004, the City Council adopted an ordinance that codified this policy and established the option for payment of an in-lieu fee for projects with three to nine units Pursuant to the ordinance, the City retained Keyser Marston Associates (KMA) to prepare a nexus study to calculate an appropriate and legally defensible in-lieu fee (ATTACHMENT NO 2) The City Council reviewed the nexus study at a Study Session in May 2006 and formed an Ad Hoc Committee to further discuss issues related to the analysis The Ad Hoc Committee, with representatives from the Chamber of Commerce Building Industry Association and Huntington Beach Tomorrow, met on July 25, 2006 As a result of the discussion, the City Council Committee members directed staff to continue the processing of the in-lieu fee for projects with three to nine units and provide information to the City Council regarding other aspects of the affordable housing ordinance and in-lieu fee such as allowance of a fee for all projects and fractional calculations Regional Housing Needs Assessment (RHNA) considerations and rental versus ownership housing C STAFF ANALYSIS AND RECOMMENDATION In Lieu Fee for Small Proiects The purpose of the KMA study was to calculate an in-lieu fee that developers of projects with three to nine units could pay to satisfy their inclusionary affordable housing requirement The study quantifies the difference between market rate prices and income restricted (affordable) prices in the City of Huntington Beach for for-sale and rental projects this difference is referred to as the affordability gap The average affordability gap for ownership projects is $437 400 and $105 000 for rental projects The affordability gap is used to develop the per square foot in-lieu fee based on the City s 10 percent inclusionary requirement and the average size of ownership and rental units To account for the economics of smaller size projects KMA incorporated a 46 percent downward adjustment in the fee The resulting fees are listed in the table on page 2 of this report and range from $4 48 to $7 84 per square foot for rental projects and from $8 28 to $14 55 for ownership projects The recommended fees include an inflation adjustment from the 2006 KMA study as is presented in the follow-up memorandum from KMA (ATTACHMENT NO 3) Examples of how much the in-lieu fee might be for sample projects are presented below Type of No of Size of Each Total Project In-lieu Fee Total In-lieu Project Total Unit Square per sq ft fee required Units in (Habitable Area Footage Project Only) Ownership 4 1200 sq ft 4800 sq ft $9 29 $44 592 Rental 4 800 sq ft 3200 sq ft $5 04 $16 128 G\RCAs\2007\PL07 12(Affordable Housing In Lieu Fee)doc 3 4/23/2007 REQUEST FOR ACTION MEETING DATE May 7, 2007 DEPARTMENT ID NUMBER PL07-12 Staff and KMA believe that the nexus study presents a well documented, reasonable and legally defensible in-lieu fee for projects with three to nine units Based on input from developers of small projects over the years, staff believes that providing an alternative means to satisfy the City's inclusionary housing agreement is needed Developers have consistently noted concerns related to financing monitoring, and qualifying buyers/renters as a result of having to restrict one on-site unit in a small project With respect to the specific fees that are recommended for adoption, however, the development community has expressed that calculating an in-lieu based on an ownership project is unreasonable due to the costs of development, including land Rather, many believe that the affordable housing in-lieu fee should be calculated only using rental projects As demonstrated in the table on page 2 of this report, the in-lieu for rental projects is notably less Pursuant to the City affordable housing ordinance, in-lieu fee payments would be deposited in a Housing Trust Fund This fund will be established upon receipt of the first in-lieu fee payment The City s ordinance lists the uses for the Housing Trust Fund and restricts the use of funds for projects that have a minimum of 50 percent of the units affordable to very low and low income households, with at least 20 percent of the units available to very low income households At the discretion of the City Council the funds may be used for pre- development costs, land or air rights acquisition, rehabilitation land write downs administrative costs gap financing or to lower the interest rate of construction loans or permanent financing The Economic Development Department would administer the Housing Trust Fund Other Issues related to the In-Lieu Fee The Ad Hoc City Council Committee discussed several topics related to the in-lieu fee and requested that staff provide a review of these topics in this report Allowance of fee for all projects The development community has expressed a strong interest in allowing all new residential projects regardless of size, to pay an in-lieu fee rather than directly providing the units From the developers' perspective, the ability to pay a fee has the advantage of being less expensive, quicker easier to get financing without affordable covenants recorded on the property and less cumbersome in that they do not have to manage screening affordable buyers or renters The advantage of this approach to the City is that monies would accrue more quickly in the Housing Trust Fund, which would give the City more resources with which to assist affordable housing projects From the City s perspective the disadvantages of this approach are that affordable housing is less likely to be integrated into projects throughout the city and additional staff resources would be required to administer a more sizable fund In the past the City Council has expressed the opinion that the development community is best suited to creating new housing including affordable housing Moreover the City Council thought that larger projects were better able to absorb the cost of providing tCAs\2007\PL07 12(Affordable Housing In Lieu Fee)doc-4 4/23/2007 3 49 PM REQUEST FOR ACTION MEETING DATE May 7, 2007 DEPARTMENT ID NUMBER PL07-12 affordable units Hence, the ordinance that was adopted in 2004 only allows smaller size projects to pay an in-lieu fee In response to the input received from the development community, the City Council may wish to direct staff to amend the affordable housing ordinance to increase the size of projects that could pay an in-lieu fee or to allow all projects to pay the fee Should the City Council decide to modify the ordinance in this regard, the City would be required to complete a nexus study, similar to the one attached to this RCA This would be done concurrent with the zoning text amendment Fractional calculations The City requires that a minimum of 10 percent of a project's units be affordable, either on- site or off-site To comply with the ordinance if the calculation results in a fractional number, it is rounded up to the next whole number Otherwise, rounding down would result in less than the 10 percent requirement Thus, a four unit project would be required to provide one affordable unit (4 x 0 10=0 4 is rounded to 1), and a 23 unit project would be required to provide three affordable units (23 x 0 10=2 3 is rounded up to 3) The development community has requested that the City consider not rounding up when determining the affordable requirement With the proposed in-lieu fee, this approach has been Incorporated in that the fee is calculated using the 10 percent factor In the case of projects that are not currently eligible to pay the fee, the City could consider allowing payment of an in-lieu fee for the fractional portion only Using the 23 unit project as an example a developer could be required to provide two affordable units and pay the fee for the 0 3 portion Alternatively if the City changes the existing ordinance to allow any size unit to pay a fee then the fractional calculation would ultimately be incorporated In either case staff would recommend that the specific calculation method be set forth in the zoning code via changes to the existing ordinance Ownership versus Rental housing The City Council Ad Hoc Committee discussed the concept of only requiring affordable housing to be rental Concerns were expressed about the difficulty in monitoring for-sale projects over the long term and finding buyers who qualify Currently, the City does not mandate what type of unit a developer must provide, I e owner or rental, to comply with the affordable requirement Thus, if a developer is building an ownership project, rather than record a covenant on one or more units in their project the developer could elect to acquire a rental project and restrict it accordingly Clearly this is less feasible for a small scale project in that it may be cost prohibitive or it may be difficult to find a rental project that is for sale At this point in time staff does not recommend changing the ordinance to specify that only affordable rental units would be required It may be the case that a large scale ownership project would find it easier to meet its affordable housing requirement on site This would more likely continue to be the case if the City Council does not pursue allowing all projects to pay an in-lieu fee regardless of size G\RCAs\2007\PL07 12(Affordable Housing in Lieu Pee)doc 5 4/2312007 3 49 PM REQUEST FOR ACTION MEETING DATE May 7, 2007 DEPARTMENT ID NUMBER PL07-12 RHNA requirements All jurisdictions in California are required to demonstrate in their General Plan Housing Elements how they are able to contribute to meeting their fair share of the needed housing supply for their region over a penod of five to eight years The number of housing units assigned to each jurisdiction is embodied in the Regional Housing Needs Assessment (RHNA) The RHNA divides housing need into four income categories Very Low, Low, Moderate and Upper and specifies how many units in each of these income categones should be built during the planning period The RHNA requirements are the underpinning for the City of Huntington Beach s affordable housing ordinance By having an inclusionary housing requirement, the City is more likely to be successful in having affordable units created, which allows the City to demonstrate to the State good faith efforts toward ameliorating the statewide housing shortage The City Council Ad Hoc Committee briefly discussed the role that RHNA plays in driving City policy Staff stated that they would report back on the next RHNA cycle, which officially began in February 2007 when the Southern California Association of Governments approved the draft RHNA for the Housing Element cycle for January 1 2006 through June 30 2014 Income Cate ones/Number of Units Very Low Moderate Upper Total Low Existing RHNA 388 255 400 972 2015 1998-2005 New Draft RHNA 450 366 410 848 2074 2006-2014 As shown in the above table the City s allocation of Very Low and Low income units has increased by a total of 173 units even though the overall total has increased by only 59 units This is an indicator that the number of Very Low and Low income units in the city is disproportionate to the need in the region Based on these new RHNA numbers, staff believes that the City's affordable housing requirements will continue to play a critical role in satisfying statewide housing goals and therefore should not be lessened However these numbers also give support to the concept of encouraging affordable rental projects given that they would have a greater feasibility of being developed as Very Low and Low income projects Affordable Housing Ordinance Changes As part of KMA s work in calculating an in-lieu, the City requested that they review the existing affordable housing ordinance and make recommendations to improve it Their three G\RCAs\2007\PL07 12(Affordable Housing In Lieu Fee)doc 6 4/23/2007 3 49 PM REQUEST FOR ACTION MEETING DATE May 7, 2007 DEPARTMENT ID NUMBER PL07-12 recommendations are listed on page 16 of the report (ATTACHMENT NO 2) and are listed below 1 The Ordinance should make it clear that developers can fulfill the inclusionary requirements with Median income units for ownership projects and low income units for rental projects 2 The Ordinance should mandate that the affordable housing cost be calculated in accordance with the Code Section 50052 5 standards for ownership units and Code Section 50053 standards for rental units, and 3 The Ordinance should only allow new development and substantial rehabilitation, as defined by the Code Section 33413 affordable housing production requirements, to fulfill the off-site inclusionary housing option allowed by the Ordinance Staff recommends the City Council direct that a zoning text amendment be processed to evaluate these recommended ordinance changes Depending on the City Council's direction with regard to the other items in this RCA, these ordinance changes may or may not be necessary or may need to be augmented D SUMMARY Staff recommends that the City Council adopt the resolution to establish an affordable housing in-lieu fee for projects with three to nine units, consistent with the City s existing ordinance Adoption of the proposed resolution will bring immediate relief to developers of smaller projects and would not preclude the City from subsequently modifying the fee structure if the City Council wishes to make the fee available to larger projects Staff also recommends that the City Council initiate a zoning text amendment to incorporate the recommended ordinance changes articulated by KMA Strategic Plan Goal The affordable housing in-lieu fee in consistent with Strategic Plan Goal L-1, "Establish the vision and create a land use plan for reuse of critical parcels so that the next phase of the community investment and improvement can begin " The proposed in-lieu fee will create a source of funds that the City can use to assist development and redevelopment of parcels suitable for housing and to stimulate investment in target areas Environmental Status The proposed request is exempt from the California Environmental Quality Act pursuant to Section 15061 (b)(3) G\RCAs\2007\PL07 12(Affordable Housing in Lieu Fee)doc 7 4/23/2007 3 49 PM REQUEST FOR ACTION MEETING DATE May 7, 2007 DEPARTMENT ID NUMBER PL07-12 Attachments) City C16rk's Page N,u,mber Resolution No 2007-29 , a resolution setting forth an 9 affordable housing in-lieu fee as authorized by Zoning & Subdivision Ordinance 3687 Section 230 26 s%a%ton\AssoctE es Me oran bi ed January 23, / 2 20 Ir?cl g ona y,ousin Ordi ce - eu ee eyse ars As crate Memor dum, date April 2007, 3 In siona Ho n ina a In-Lie Fee pda O #i oni and Sub visioA�Or2 roan S tion 30 26 �' �=!,Nible',Hou n 5 PowerPoint Presentation Slides G 1RCMs 20071PL07 12(Affordable Housing in Lieu Fee)doc-8 4/23/2007 3 49 PM i 007 A?.- *;r- /Z. RESOLUTION NO 2007-29 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH SETTING FORTH AN AFFORDABLE HOUSING IN-LIEU FEE AS AUTHORIZED BY ZONING&SUBDIVISION ORDINANCE 3687 SECTION 230 26 WHEREAS, on November 1,2004 the Council adopted Ordinance No 3687 adding Zoning& Subdivision Ordinance Section 230 26, relating to the goals and objectives of the City's Housing Element which is intended to encourage very-low, low and median housing WHEREAS pursuant to Section 230 26(b)(4) developers of residential projects consisting of nine or fewer units may elect to pay a fee in lieu of providing affordable units on site to fulfill the requirement of the City s Inclusionary Housing Ordinance,unless the affordable housing requirement is outlined as part of a Specific Plan Project WHEREAS the City Council has received the report from Keyser Marston Associates dated January 23 2006 which includes an analysis pertaining to the City's Inclusionary Housing Ordinance and proposes an in-lieu fee consistent with the provisions of Zoning& Subdivision Ordinance Section 230 26 A copy of this study is attached hereto as Exhibit A and incorporated herein by this reference NOW THEREFORE, the City Council of the City of Huntington Beach does hereby resolve as follows 1 The Keyser Marston report attached hereto as Exhibit A is received and filed 2 The proposed per square foot in-lieu fee shall be as follows Project Size Ownership Rental Three Units $8 28 $4 48 Four Units $9 29 $5 04 Five Units $10 41 $5 60 Six Units $11 42 $6 16 Seven Units $13 32 $7 16 Eight Units $13 54 $7 28 Nine Units $14 55 $7 84 2 An Affordable Housing Trust Fund shall be created and used to receive all deposits of in-lieu fees paid pursuant to Zoning & Subdivision Section 230 26 Interest shall accrue to the fund and no other funds shall be commingled i 06 494/7217 Resolution No 2007-29 3 Monies in the Affordable Housing Trust Fund shall be used only to fund projects which have a minimum of fifty(50)percent of the dwelling units affordable to very-low and low income households,with at least twenty(20)percent of the units available to very-low income households based on the Orange County median income adjusted for appropriate family size as published by the United States Department of Housing and Urban Development or established by the State of California pursuant to Health and Safety Code Sections 50079 5 and 50093 or a successor statute 4 Permitted uses of the Affordable Housing Trust Fund shall be at the Council s discretion and include for pre-development costs, land or air rights acquisition, rehabilitation land write-downs administrative costs,gap financing and lowering the interest rate of construction loans or permanent financing 5 Any units that obtain or benefit from the Affordable Housing Trust Funds shall maintain the affordability of the units for a minimum of sixty(60) years 6 The Affordable Housing Fee shall be updated every two years beginning in January 2008 7 The Affordable Housing In-Lieu Fee shall be adjusted every January beginning 2008 by the Cost of Living Index 8 The City Administrator or her designee shall administer the Affordable Housing Trust Fund and shall provide an annual report to City Council, which report shall include the beginning balance, ending balance, a description of the projects funded or to be funded each fiscal year The first annual report shall be provided on or before December 1 2007 for the 2006-07 fiscal year PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the day of 2007 Mayor WED AND APPROVED APPROVED AS TO FORM RE E 04�� col City Administrator jCittorn W L..�,��IU-111. INITI ED D APPROVED Director of Planning 2 06 494/7217 EXHIBIT A PLEASE SEE ATTACHMENT NO 2 TO THIS RCA FOR THE KEYSER MARSTON REPORT THAT IS EXHIBIT A FOR THE RESOLUTION 7 za7 RcA mac- �7-/z ATTACHMENT #5 Affordable Housing In -Lieu Fee May 7,, 2007 Request oAdopt affordable housing on - lieu fee for small residential projects with 3 to 9 units, pursuant to a study prepared by Keyser Marston Associates ( KMA) oDirect staff to process text changes to the affordable housing ordinance background o City Council approved affordable housing ordinance October 2004 o Ordinance allows for an in - lieu fee for projects with 3 to 9 units o City Council reviewed the in - lieu fee nexus study at a Study Session May 2006 o City Council Ad Hoc Committee formed and met July 2006 o Staff directed to process the in - lieu fee as calculated by KMA and report on other items