HomeMy WebLinkAboutResolution 2019-34 (NOT ADOPTED) amending Resolution No. 20 AP,PRO vull7 y- 3
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File #: 19-584 MEETING DATE: 5/20/2019
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Lori Ann Farrell Harrison, Interim City Manager
PREPARED BY: Ursula Luna-Reynosa, Director of Community Development
Subject:
Adopt Resolution 2019-34 amending Resolution No. 2007-71 to expand the permitted uses of
the Affordable Housing Trust Fund
Statement of Issue:
On November 1, 2004, the City Council adopted Ordinance No. 3687 adding Zoning & Subdivision
Ordinance Section 230.26 "Affordable Housing", related to the goals and objectives of the City's
Housing Element, intended to encourage lower and median income housing. On October 15, 2007
the City Council adopted Resolution No. 2007-71 establishing the annual fee and determining the
permitted uses of the Affordable Housing Trust Funds pursuant to Section 230.26(E)(6). Staff is
recommending that the City Council consider amending Resolution No. 2007-71 to expand the
permitted uses of the Affordable Housing Trust Fund to include homeless shelters.
Financial Impact:
No fiscal impact.
Recommended Action:
Adopt Resolution 2019-34, "A Resolution of the City Council of the City of Huntington Beach
Amending Resolution No. 2007-71 to Expand the Permitted Uses of the Affordable Housing Trust
Fund."
Alternative Action(s):
Do not adopt Resolution No. 2019-34 and direct staff accordingly.
Analysis:
Zoning & Subdivision Ordinance Section 230.26 "Affordable Housing" provides the City Council with
the ability to establish an Affordable Housing In-Lieu Fee and establish the permitted uses of these
fees. These fees are placed in a restricted account called the Affordable Housing Trust Fund.
Section 230.26(E)(6) specifies the process to establish the fee and permitted uses of the funds
collected via a resolution. On October 15, 2007 the City Council adopted Resolution No. 2007-71
which established the fee, the process to update it annually, and the permitted uses of the Affordable
City of Huntington Beach Page 1 of 2 Printed on 5/15/2019
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File #: 19-584 MEETING DATE: 5/20/2019
Housing Trust Fund.
The established uses currently include:
• Pre-development costs
• Land or air rights acquisition
• Rehabilitation land write-downs
• Administrative costs
• Gap financing
• Lowering the interest rate of construction loans or permanent financing
The purpose of Section 230.26 of the City's Zoning & Subdivision Ordinance is to encourage
affordable housing. Part of the affordable housing need includes extremely low-income persons that
are homeless. By amending Resolution No. 2007-71 to expand the eligible uses of the Affordable
Housing Trust Fund to include funding of homeless shelters allows another funding source to address
a critical need in the City.
Attachment 1 shows the proposed amendments to Resolution 2007-71.
Environmental Status:
This Request for Council Action involves revisions to Resolution No. 2007-71 that would broaden the
eligible uses of the Affordable Housing Trust Fund fees. This action constitutes an administrative
governmental fiscal activity, which does not involve the commitment to any specific project with the
potential to result in significant physical environmental impacts or reasonably foreseeable indirect
physical changes to the environment, and as such, is not a project as defined in Section 15378 (b)(4)
and (5) of the CEQA Guidelines.
Strategic Plan Goal:
Non-Applicable - Administrative Item
Attachment(s):
1. Resolution 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"
2. Resolution 2019-34, "A Resolution of the City Council of the City of Huntington Beach
Amending Resolution No. 2007-71 to Expand the Permitted Uses of the Affordable Housing
Trust Fund."
City of Huntington Beach Page 2 of 2 Printed on 5/15/2019
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City Council/
Public Financing Authority ACTION GENDA May 20, 2019
Recommended Action:
Adopt Resolution No. 2019-25, "A Resolution of the City Council of the City of Huntington Beach
Levying a Retirement Property Tax for Fiscal Year 2019/20 to Pay for Pre-1978 Public Employee
Retirement Benefits" of$0.01500 per$100 of assessed valuation. The tax rate of$0.01500 would
continue the tax rate included in the current Fiscal Year 2018/19 Adopted Budget.
Approved 5-2(Semeta, Peterson— No)
28. 19-559 Adopted and authorized recordation of Resolution No. 2019-26 ordering the
Summary Vacation of an existing Walkway Easement to the former Franklin
School Site
Recommended Action:
A) Adopt Resolution No. 2019-26, "A Resolution of the City Council of the City of Huntington Beach
Ordering the Summary Vacation of a Public Service Easement for Pedestrian Walkway Purposes
Generally Located Between Spa Drive and the Former Franklin School in the City of Huntington
Beach" (Attachment 1); and ,
B) Instruct the City Clerk to record Resolution No. 2019-26 and the attached exhibits with the
Orange County Recorder.
Approved 7-0
29. 19-584 Approved as amended to bring Resolution back to Council as part of funding
options for Homeless Navigation Center improvementsadopted Resolution
2019 34 amending Resolution No 2007_71 to expand the permitted- uses of
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the Affordable Housing Trust Cnnd
Amended motion: Bring Resolution back to Council as part of funding options for homeless
Navigation Center improvements.
Affordable Heu6ing Trust Fund "
Approved 4-3(Semeta, Peterson, Posey— No)
30. 19-607 Adopted Resolution No. 2019-38 modifying benefits for Non-Represented
Employees including the elected City Attorney, City Clerk and City Treasurer
Recommended Action:
Adopt Resolution No. 2019-38, "A Resolution of the City Council of the City of Huntington Beach
Modifying Benefits for Non-Represented Employees Including the Elected City Attorney, City Clerk
and City Treasurer."
Approved 7-0
Page 9 of 13
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
111
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
publistled 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
a
aor
REVIEWED AND APPROVED APPROVED AS TO FORM
,City Administrator City Attorney
fNITIAT.tD AND APPROVED
Dire or of Iffanning
2
06 494 001/13898
112
Resolution No 2007 71
EXHIBIT A
113
Resolution No 2007 71
9p� KEYSER MA.RSTON ASSOCIATES
Z0`4* ADVISORS 11 PU61.11/111111 REAL ESTATE DEVELOPMENT
�401
''qv�y MEMORANDUM
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ADVISORSIK
P"j,ROE To Mary Beth Broeren Principal Planner
REDEVELOPMENT City of Huntington Beach
.UC DEVELOPMENT
From Kathleen Head
Sit FRANCISCO
A JEP"IT6M Julie Romey
-ru tonn c r.Euv
KALE EARLE FUSIM
Dam M_KERN Date January 23 2006
oaEnj W"MoRE
LOS ANGELES Subject. Inclusionary Housing Ordinance-ln-Lieu Fee
kLVJN E.Hoes it
:ATMEEN H HEAD
JAMES A_RAZE
PAUL G ANDERSON At our request Ke
GoRY D Soo-HOo Y �l yser Marston Associates Inc (KMA) prepared the following analysis
pertaining to the City of Huntington Beach (City) Indusionary Housing Ordinance
ERALo T°unu (Ordinance) Specifically KMA evaluated the Ordinance provision that allows
PAULC MARK, 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 projects are defined as an entirely new project or new units added to an existing
i 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)
500 SOUTH GRAND AVENUE,SUITE 1480> LOS ANGELES CALIFORN lA 90071 > PHONE_213 622 9095 > FAx 213 622 520V4
Resolution No 2007 71
1
To Mary Beth Broeren City of Huntington Beach January 23 2006
Subject- Inciusionary 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 prior to the construction
and occupancy of market rate units
4 For small projects defined as projects including nine or fewer units,the
i nclusionary housing requirements may be satisfied by payment of an in-lieu fee
established by resolution of the City Council and updated annually-' )
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 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 see of the new residential units
115
Resolution No 2007 71
To Mary Beth Broeren City of Huntington Beach January 23 2006
Subject- Wusionary Housing Ordinance-In-Lieu Fee Page 3
c The sales prices or rents must be affordable to very-low 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 pnces 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
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 inclusionary 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-Lieu Fee amount.
6 The Ordinance limits the in-lieu fee option to projects with nine or fewer units
i The in-lieu fee analysis recognizes that the inclusionary requirement has a
greater impact on smaller projects than it does for a typically sized prroject-
116
Resolution No 2007 71
To Mary Beth Broeren City of Huntington Beach January 23, 2006
Subject lnclusionary 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 IW16 of the Median instead of the 120%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-Low 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-$60 650
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
117
Resolution No 2007-71
To Mary Beth Broeren City of Huntington Beach January 23 2006
Subject Inclusonary Housing Ordinance-In-Lieu Fee Page 5
AFFORDABILITY GAP ANALYSIS--OWNERSHIP PROJECTS(APPENDIX A)
Market Rate Sales Prices
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 Valas 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 paces for each
product type
1
Average Average
Unit Size Sales Average
(Sf) Prices $1Sf
One-bedroom Units 811 $348 5W $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
(St) $/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 built to the 1980 s and was converted from apartments to condominumis in
2003
118
Resolution No 2007 71
To Mary Seth Broeren City of Huntington Beach January 23 2006
Subject- lndusionary Housing Ordinance-in-i-jeu 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°!0 of the Medan as published by HCD 5
3 Thuty-five percent(350A)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 mdude 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 1 081% 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
!'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
119
Resolution No 2007 71
To Mary Beth Broeren,City of Huntington Beach January 23 2006
Subject lnclusionary lousing Ordinance-In-Lieu Fee Paige 7
Assuming the home buyer makes a down payment equal to 101/6 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
Horne Buyer Down Payment 20 9W 24100 27 000
Affordable Purchase Price $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 man 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-law or tow 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%muibplied
times the onginal balance on the first trust deed mortgage
120
Resolution No 2007 71
To Mary Beth Broeren City of Huntington Beads January 23 2006
Subject lnclusionary 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 distributed by HGO and the affordability
standards unposed by Code Section 500531
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°A of the units The affordability gap was
then translated into the value reduction generated by the income and affordabilidy
restrictions imposed by the Ordinance ; )
4 The Ordnance 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—1000/0 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
s Small investors will sometimes develop a smaller project to hold over the long-term However
in the current market place it is Far more financially advantageous to build a small condominium
project rather than a small apartment project
121
Resolution No 2007 71
To Mary Beth Broeren City of Huntington Beach January 23 2006
Subject. lnclusionary Housing Ordinance-in4-&eu 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 c omparables for apartment buildings that
have been renovated since 2000 The following illustrates the average asking rents for
recently rehabiittated apartment units in Huntington Beach
Unit Size Monthly
Unit T (Sf) Rents $ISf
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 1510/0
Premium for new construction the projected market rents for a new apartment project
are as follows
Unit Size Monthly
Unit T (SM $/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 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 inclusionary 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°A of the Median for low income units
3 30% of the defined household income is allocated to housing related expenses
122
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 unposed 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 wring to pay rent that exceeds the prevailing
rate in the market area As such it is important to estimate the rents that could be i
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 bow
Unit Type Rate Income Difference
One-bedroom Units $1 443 $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 scenario are
i 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 51/ vacancy and collection allowance {
9 Rental utility allowances include gas and electricity expenses only
123
Resolution No 2007 71
To Mary Beth Broeren, Cdy 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 protects 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 08A rate to estimate the relative values supported by
market rate and low income units
Based on the preceding assumptions the values per unit are estimated as follows
NOI I 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 VatueAJnd $200 000
(Less)Low Income ValueAJnit 95 500
Affordabir Gap $105 000
Inclusionaty 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 affordabirty 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%inclusionary housing requirement This equates to$10 500 per unit development in
a market rate project
124
Resolution No 2007 71
To Mary Beth Broeren,City of Huntington Beach January 23 2006
Subject. Industonary Housing Ordinance-In-lieu Fee Page 12
2005 MAXIMUM ALLOWABLE IN-UEU FEES
The Cdy's objective is to establish an in-lieu fee schedule that provides the City with
adequate funds to produce the mclusionary 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 effectirte 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 rn-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 ln-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 Elate 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 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-
und 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 nine or
fewer units KW reduced the Base In-Lieu Fee by 46%
125
Resolution No 2007 71
To Mary Beth Broeren, City of Huntington Beach January 23 2006
Subject~ Inc lusionary Housing Ordinance-In-Lieu Fee Page 13
The resuffing fees for nine-unit projects are
Per Sf of
Budding Area
Ownership Projects $13
Rental Projects $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 nine-und projects'°
Asa%of
Small Project
Project Size Base Fee
Three Units 67%
Four Units 64%
Five Units 71%
Six Units 79%
Seven Units 92%
Eight Units 93%
Nine Units i 009i6
The in-Geu fees that resutt 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
i0 It is dtfficutt to precisely protect the financial impact generated at each protect we The
recommended sliding scale percentages are based on the scales currently being applied in West
Hollywood and Pasadena
126
Resolution No 2007 71
To Mary Beth Broeren,City of Huntington Beach January 23 2006
Subject Indusionary Housing Ordinance-ln4jeu Fee Page 14
Ili--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 ages 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 in4eu
of producing the affordable units
For the surveyed cities that have established fee schedules the ui-lieu fee is calculated
on one of the follovinng 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 Building Area
Junsdictwn In-Lieu Fee Amount
Chino $2 72
Duarte $6 50
Pasadena "
Rental Projects $12—$22
Ownership Prgects $5-$41
San Diego 13 $1 25-$25fl
Santa Monica 14 $22.33-$26 08
West Hollywood i5 $6 70-$13 40
" The in-lieu fee amount is only applicable to projects developed in the Preserve
'Z Projects with fewer than 10 units are exempt from the Program
13 The lower fee is charged for projects with fewer than 10 units
1
4 The lower fee is charged for apartment projects and the higher fee is charged for ownership
projects
t5 An in-lieu fee can only be paid for projects with 20 or fewer units The fee vanes by number of
units in the project
127
Resolution No 2007 71
To Mary Beth Broeren City of Hunts-gton Beach January 23 2006
Subject Inclusionary Housing Ordinance-In-Lieu Fee Page 15
Per Unit in a Market Rate Project
Jurisdiction In-Lieu Fee Amount
Agoura HMIs $4 541 -$6,277
Laguna.Beach " $7 047
Coronado $7 Olin
As a%of Pr /Construction Valuation
Junsd:dron In-Lieu Fee Amount
San Clemente 1 00%
San Juan Capistrano 1 1 00%
The in-lieu fees being charged by the surveyed cities vary widely Moreover since many
cities negotiate the m4teu 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 iridusionary 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 Caldfomia cities
IN4JEU 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 Ordinance without
stopping the development of smaller projects
26 The lower fee is charged for apartment projects and the higher fee is charged for ownership
projects
17 The fee is set at$46 978 per affordable lot or unit, 15%of the units are required to be
affordable
128
Resolution No 2007 71
To Mary Beth Broeren City of Huntington Beach January 23 2006
Subject Incluslonary Housing Ordinance-In-Lieu Fee Page 16
The preceding analysis indicates that the affordalAity gap is $24 per square foot for
ownership units and $12 per square foot for rental projects However, it is the KMA
conclusion that fees of the this magnitude are likely to render small projects infeasible
To balance the Cdty's objective to generate revenues to pursue affordable housing
activities against the need to ensure that the m4ieu fee does not result in a constraint to
development KMA recommends that the m-heu fee schedule be set as follows
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
KMA also offers the following recommendations
1 The City should create a mechanism for re-evaluating the in-heu fee amount on a i
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 unds18, 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
18 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
129
Resolution No 2007-71
APPENDIX A
OWNERSHIP ANALYSIS
130
Resolution No 2007 71
APPENM A-TABLE 1
NEW CONSTRI1GT10N SALES COMPARABLES
W4-1E-U FEE AKALYW
HUNTINGTON BEACH,CAUFORNIA
FloogAans
Year Bmit i Type Urut #of Umt Base
ProjecgAddre= Sold Out HOA Fee a Type Units Sue(Sf) Pnce $/Sf
I Seabndge Villas 2003 Condo One-bedtoom 72 485 $230 000 $474
Beads Blvd 8 Adams 2004 $350 Otte-bedroorn 19 760 310 000 408
Otte-bedroom 83 765 300 000 392
One-bedroom 46 885 360 000 407
Twabedrootns 24 970 335 000 345
Two-bedrooms 59 1 095 405 000 370
Two-bedrooms 8 1 100 340 000 309
Two-bedrooms 4 1,240 415 000 335
Twobedrooms 29 1 285 470 000 366
Totals/Averages 344 850 $330 974 $389
0 Bel Air 2004 Duplex Three bedrooms 28 Z484 $910 000 $366
Gothard&Garfield $276 25 2 497 898 820 360
Three-bedrooms 26 2.5% 920 000 360
Three-bedrooms 23 2.636 907 855 344
TotaWAverages 102 2 S39 $909,365 $358
lot Peninsula Pant 2004 SFD Three bedrooms 5 1990 $869 900 $437
Main Street&Clay $95 7 2,174 899 900 414
Three-bedrooms 1 2.260 919.900 407
TotaWAverages 13 7,110 $$D3919W $422
IV Sea Cave 2004 Townhomes One-bedroom 26 1 770 $838 990 $474 l
PCH A Gotdenwest $405 Two-bedrooms 19 1 620 829990 512
Twabedrooms 21 1 845 917 990 498
Two-bedroans 19 2,690 987 990 367
Three-bedrooms 21 2,450 1 014 990 414
Totals/Averages 106 2As8 $914 603 $445
v Attached Units I Large Projects 552 1 834 $853140 $465
One-bedroom 246 811 $348 470 $430
Tvwo4)edmmr, 183 1 418 $567 019 $400
Three-bedrooms 123 Z524 $927 399 $367
Vi 10etiched Units I Small Projed 13 2,110 $889,900 $422
Three-bedroom Units 13 2,110 $M 900 $422
VIL Ath Units 665 1.841 $$s3 m $464
One-bedr=n 246 811 $348 470 $430
Two-bedrooms 193 1 418 $567 019 $400
Three-bedrooms 136 2,484 $923 814 $367
Source Hanteywood Market intelligence for the City of Huntington Beach
131
Prepared try° Keyser Marston Assoctates Inc
Resolution No 2007 71
1PPENDIX A-TABLE 2
AFFORDABLE HOUSING PRICES
-U FEE ANALYSIS
IuNnNGTON BEACH.CAUFORNIA
One-bedroom Two-bedroom
Units Units tkft
Household Income @ 100%of County Median $60 550 $68150 $75 700
1 Income Available for Mortcage Debt Service
Income Allotted for Housing P_35%of Income Z $21.200 $23 900 $26 500
(Less)Ongoing Expenses
HOA,Insurance Mmntenance 3 (3 792) (3 792) (3 792)
UbTuties` (852) (9") (1.380)
Property Taxes @ 1 08%of Affordable Pace ' (2,262)
Income Available for Mortgage Debt Service $14 294 $16 521 $18 414
N Maximum Mortgage @ 6 5%Interest Rate s $188 500 $217 800 $24Z800
V Home Buyer Down Payment u@ 100f.Affordable Price 3 $20 900 $24100 $27 000
Maximum Affordable Home Price $209 400 $241 900 $269,800
i Based on the 2005 Orange County median incomes provided by HGD Per the requirements imposed by California Health
and Safety Code Section 500525 the household size is set at three persons for twabedrooiri units and four persons for
three-bedroom units, The Ordinance limits the moderate income units to households earning 1000/.of the median_
2 Based on Cafifornia Heatth and Safety Code Section 50052 5
3 Based on the Redevelopment Agenc}rs assumptions The Agency calculates the affordable prices for the City
° Based on the current Orange County utility allowances Includes gas electricity water and trash
$ Based on the current 30-year fixed mortgage rate
132
PrePared W Keyser Marston Associates Inc
Resolution No 2007 71
APPENDIX A-TABLE 3
AFFORDABILITY GAP CALCULATION-OWNERSHIP PROJECTS
1"EU FEE ANALYSIS
t
HUNTINGTON BEACH CALIFORNIA
One-bedroom Two-bedroom Three-bedroom
Units Units Units
I Affordabditlt Gap Calculation
Market Sales Prices i $343 600 $559 700 $918 600
(Less)Maximum Affordable Sales Prices 2 (209 400) (241900) (W9 8"
Affordablity Gap i Affordable Unit $134 200 $317,800 $M goo
Affordability Unit Type
Il Average Affordability Gap Calculation Gap Distribution'
One-bedroom Units $134,200 251%
Two-bedroo n Units $317 800 25%
Mwee-bedroom Units $648 800 50°/a
Average Affordability Gap 1 Affordable Unit $437 400
III Affordability Garb i Total Unit Calculation
Average Affordabliity Gap 1 Affordable Unit $437 400
Affordable Units as a%of Total Units` 100/10
Affordability Gap/Total Unit $43,700
' Market rate prices are based on the following 800 sf one-bedroom units @$4301sf 1400 sf hvo-bedroom unds
@$4001st and 2 500 sf tluee-bedroom units @$3671sf
2 See APPENDIX A-TABLE 2
3 KMA estimate
4 Based on the Gty Ordinance
133
Pr.-nared bw Kevser Marstan Assoaates fnc
Resolution No 2007 71
APPENDIX B
RENTAL..ANALYSIS
134
Resolution No 2007 71
1PPENM B-TABLE 1
IPARTMOIT RENTAL RATE COMPARABLES
WLIEU FEE ANALYSIS
WNT1NGTON BEACH CALIFORNIA
Year
Zip Bisttl Total Unit Base
Name&Address Code Renovated Units Type Rent SF I Unit $1 SF
La Quuita Hermosa 92647 1971 94 ill $1 155 725 $1 59
16211 Padmode Lane 2000 2/1 1 405 940 $149
211 1415 945 $150
2/1 1530 1110 $138
! Las BnsasWKia Del Mar Apartments 92649 1976 62 Ill 1 170 800 $1 46
16602 and 16552 Sell Carde 2000 2/2 1450 1,200 $1.21
t Ardistone Huntington Beach 92647 19% 152 Ill 1;3W 725 $1 79
8945 Riverbend Drive 2000 211 1 650 925 $178
1 Huntington Breakers 92648 1965 324 Oil 1050 450 V-33
21270 Beach BW 2000 Ill 1305 635 $2A6
111 1355 625 V-17
212 1615 925 $175
212 1655 900 $1..84
212 1655 900 $184
i Los Patos Apartments 92649 1973 71 On 1 000 400 $2.50
17172 Boisa Chica 2004 Ill 1,200 700 $171
211 1500 1000 $1.50
S Maddox Apat4nents 92647 1971 56 1/1 1045 750 $1 39
7051 Maddox Dr 2002 211 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 ill 1 150 800 $1 44
211 1225 &% $144
211 1,275 900 $142
2/2 1450 1100 $132
312 1700 1288 $132
312 1750 1440 $122
8 Avalon At Pacific Say 92647 1970 304 Ill 1 195 750 $1 59
6700 Warner Ave 1999 211 1 540 1 000 $1 54
212 1495 1000 $150
9 Huntington Creek 92647 1978 194 Oil 990 605 $1 96
8211 San Angelo Dr 2001 Ill 1 190 729 $163
2115 1 510 1075 $140
Sample Average Min. Max. Avg. Avg
Sao Unit Size Rent Rent Rent
Studios 3 452 $1000 $1100 $1000 $2.26
143edroom Units 11 723 $1000 $1 400 $1 200 $1 67
243edroom Units 17 988 $1,200 $1 700 41500 $1.50
3-Bedroom Units 2 1 364 $1 700 $1 800 $1 700 $1.27
Source RenMeLcom,07/06105
I 1
135
Prepared by Keyser Marston Associates Inc-
Resotution No 2007 71
APPENDIX 8-TABLE 2
#RR QRDASLE RENTS FOR LOW INCOME HOUSEHOLDS
Ell FEE ANALYSIS
HUNT'INGTON BEACH CAUFORNIA
One-Bedroom Two-Bedrooms -
Units units i
I Low Mcome
Income @ 60%County Mean 2 $36 340 W 880
`yo of Income Allotted to Housing 3 30 0% 30 0%
Monthly Housing EMnses $909 $1 022
(Less)Utilities Expenses` (32) (40)
M Rent $8n $982
i Based on the 2005 Orange County median incomes provided by HCD Per the requirements unposed 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
z Based on the 2005 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 current Orange County utirdy allowances Includes gas and electricity
136
Prepared by- Keyser Marston Associates lac,
Resolution No 2007 71
4PPERM B-TABLE 3
PROJECT VALUE-100%MARKET RATE UNITS
2EN7AL PROTOTYPE t
N-LIEU PEE ANALYSIS
4UNi1NGTON BEACH CALIFORNIA
Rental Income
On&Bedroom' 25 Units $1 443 Ajnif $433 000
Two-Bedrooms 2 25 Units $1 729 IUnd 518 800
Miscellaneous Income 50 Units $15 00 A1rut 90M
Gross lomne $9g0 800
(Less)Vacancy Allowance 5 0% of Gross Incoine (48 000)
Effective Gross Income $912,800
I Operating Expenses
General Operatuig Expenses 50 Units $3 800 !Unit ($190 000)
Property Taxes 3 50 Units $2 201 A1iut (110 000)
Operating&Capital Reserves 50 Unds $250 Ajnd (12 500)
TOW Operatung Expenses ($312,500) 1 �
t Net Operating Income $M 300
Per Unit MOW
fV JProjectVajUe4 $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 fl/o capitalization rate The property tax rate is set at 1 10%of value.
" The value is projected based on a 6 01/.capitalization rate
{
137
Resolution No 2007-71
APPENDIX B-TABLE a
P—-IJECT VALUE-100'%LOW INCOME UNITS
£AL PROTOTYPE
N-4JEU FEE ANALYSIS
1UNTINGTON BEACH CALIFORNIA
Rental Income
One-Bedroom i 25 Units $877 /Unit $263100
Two-Bedrooms 25 Units $982 !Unit 294 600
Mscellaneous tncome 50 Units $15 00 /Unit 9 000
Gross Income $5W 700
(Less)Vacancy Allowance 5 01/o of Gross Income (2g 300)
Effective Gross Income $M 400
1 Operating Expenses
General Operating Expenses 50 Units $3 800 tUrut ($190 000)
Property Taxes 2 50 Units $1041 A*ut (52,000)
Operatng&Capital Reserves 50 Units $250 Rind (12,500)
Total Operating Expenses ($254.5p)
fig Net Operating Income Sin 90t!
Per Unit $5 700
ry Project Value 3 $4 732,000
Per Unit $95 000
See APPENWX B-TABLE 2
z The value is projected basest 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 00/6 capitalization rate
138
Prnnnfm
Resolution No 2007 71
APPENDIX B-TABLE 5
AFFORDABILITY GAP CALCULATION-RENTAL PROJECTS
IN-LIEU FEE ANALYSIS
HUNTINGTON BEACH,CAUFORNIA
Net Operating Project AffordalmIdy
I Affordabslitt►Gap k1come Value Gap
Low Income Gap/Unit
Market Rate Soenano` $12 000 $200 000
Low Income Scenano 2 $5 700 M 000
Affordability Gap 1 Umt $105 000
p Affordabddy Gap!Total Unit Calculation
Affordabiirdy Gap/Affordable Urot $105 000
Affordable Units as a%of Total Units 10°�
lAffordability Cap/Total Und $10, -00
See APPENDIX B-TABLE 3
2 See APPENDIX B TABLE 4
i
139
Resolution No 2007 71
APPENDIX C
IN-LIEU FEE CALCULATION
140
Resolution No 2007 71
APPENDIX C-TABLE 1
SMALL PROJECT ANALYSIS
IN-UEU FEE ANALYSIS
HUNTINGTON BEACH.CALIFORNIA
Prototype Project
L Prmected Sales Revenues' #of Units Sates Prices Total Revenue
One-bedroom Units 5 $343 600 $1718 000
Two-bedroom Units 5 559 700 2.799 000
Ttwee-bedroom Units 20 918 600 18 372,000
Total Project Revenue 30 $76-4967 $22 889 000
If Land+Construction Costs $649 000 /Unit $19 456 000
HI Developer Profit
Total I Wo Sales Revenues $3 433 000
Per Unit $114 000
Small Project
#of Units Sales Pnces Total Revenue
I Proiected Sales Revenues'
One xxkoom Units 2 $343 600 $687 000
Two-bedroom Units 2 559 700 1 119 000 i
Three-bedroom Units 5 918 600 4 593 000
Total Project Revenue 9 $711000 $6 399 000
11 Land+Construction Costs $649 000 /Unit $5 841 000
III Developer Profit
Total $658 000
Profit Per Unit $62 000
Profit Differential Per Unit $52.
%Difference 46%
' See APPENDIX A TABLE 3
2 Based on stabilized return on total investment_
141
Resolution No 2007-71
1PPENOIX C-TABLE 2
c IN4-tEU FEE SUMMARY
U FEE ANALYSIS
WNTINGTON BEACH CALIFORNIA
Base in-lieu Fee /Total Unit M GBA
2005 In-Ueu Fee-Ownership Projects $43 700 ' $24 2
2005 la4leu Fee Rental Projects $10 500 3 $12 4
1 Base In-Geu Fee for Small Protects Ownership Rental
Base In-&eu Fee $24 $12
Loss in Profit 5 46% 46%
Base In-lieu Fee for Small Prolecfs $13 $7
N Sliding Scale as a%of the Base Wieu Fee Ownemwp Rental
Three Unit Projects 570.E 57%
Four Und Projects 640A 64%
Fare Unit Projects 71% 71%
Sm Unit Projects 790/0 790/6
Seven Unit Projects 920A 92%
Eight Unit Pray 9356 936A
Wile Unit Projects 100% 10(%
5 SWUng Scale In fiieu Fee Ownership Rental
-Abree Unit Projects $7 $4
Four Unit Projects $8 $4
Five Unit Projects $9 $5
Six Unit Projects $10 $6
Seven Unit Projects $12 $6
Eight Unit Projects $12 $7
Nine Unit 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
Assumes that the units average 875 square feet ui we
5 See APPENDIX C-TABLE 1
142
Prepared b)r Keyser Marston Associates Inc_
Resolution No 2007 71
ADVISORS IN PUBLIC/PRIVATE REAL ESTATE DEVELOPMENT
MEMORANDUM
AOVtSORS IN To Mary Beth Broeren Principal Planner
REAL ESTATE
REDEVELOPMENT City of Huntington Beach
A FORDABLE HOUSING
:CONOMiC DEVFtOPMf NT
From Kathleen Head
S'N FRANCISCO
A JERRY KEYSER
TIMOTHY C KELLY Date April 9 2007
KATE EARLE FUNK
DEBBIE M KERN
ROSERT J WETMORE Subject inclusionary Housing Ordinance-In-Lieu Fee Update
CS AN-f Lf
CAIVIN E HOLLIS It
KArft A H HEAD
J in a memorandum dated January 23 2006 Keyser Marston Associates Inc (KMA)
JAWS RAGE
PAW C ANDERSON recommended an in-lieu fee schedule for residential projects with nine or fewer units that
GREGOR,D Soo HOO are subject to the City of Huntington Beach(City) Inclusionary Housing Ordinance
KEVIN E E^IGSFROM
JULIE L ROMEY (Ordinance) The recommended schedule is presented in the following table
SAS DIEL,O
GERALD M TRIMBIE Project Size Ownership Rental
PAUL C 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'
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 0D41D14 143
Resolution No 2007 71
To Mary Beth Broeren City of Huntington Beach Apnl 9 2007
Subject Inclusionary 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 sates 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
Q
i J
0704009 doc HTB KHH gbd 144
14066 000014
Resolution No 2007 71
APPENDIX C TABLE 2
2005 IN-LIEU FEE SUMMARY
IN-LIEU FEE ANALYSIS
HUNTINGTON BEACH CALIFORNIA
Total Fee Per
1 Base In lieu Fee Unit
2005 In Lieu Fee Ownership Projects $43 700 i
2005 In Lieu Fee Rental Projects $10 500 2
Average Fee Per Unit $27 100
it Base In lieu Fee for Small Proiects
Base In-lieu Fee $27 100
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 Stidmg 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 2107 As APPX C T2 145
Resolution No 2007 71
KEYSER MARSTON ASSOCIATES
ADVISORS IN IL,ISLIC/I KIVArI RfAt FSTAIF DE%FIOI MFNF
MEMORANDUM
AEA,BORS IN
REAL FSFAII
REf}LVtLUI MLh, To Mary Beth Broeren Principal Planner.
1FFORQARtt HOLiti'"C City of Huntington Beach
ECONOMIC DLV1t01'MFN7
SkN FRANCISCO From Kathleen Head
A.TERRY Ktt.fR
rtm.o f m Cr I(M)
KATt EARLt FUNk Date October 1 2007
DEBBIE M KFfik
ROHI-RI I WEIMURt
Los ANGEL F5 Subject Inclusionary Housing In Lieu Fee Calculation Methodology
C.ALVIN E MEW 11
KAIHM"H HIAIS
JAMES A RAW
fatf,( AN,),RSUti In a memorandum dated January 23 2006 Keyser Marston Associates Inc (KMA)
RL(ORt 1) SCXI HOO recommended in lieu fee schedules for residential projects with nine or fewer units that
SAN DIR 0 are subject to the City of Huntington Beach (City) Inclusionary Housing Ordinance
GI RAIL) TRIMA[t (Ordinance) Ina memorandum dated April 9 2007 KMA updated the recommended
PAUL C %ANRKA
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
�)00 SOUTI I GRAND AVENUE SUITE 1480 r LOS ANCELES CALIFORNIA 90071 > PHONE 213 622 8095 > rAx 213 622 5204
0709027L HTB KHH gbd
WWVv KFYSFRMARSTON C M 14066 004/014
146
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
Protect 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
147
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 Iieu 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 bans 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 e 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
148
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
11 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 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 analysts 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
149
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
CU Clerk and ex-office Jerk of the
City Council of the City of
Huntington Beach California
150
RESOLUTION NO. 2019-34
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF HUNTINGTON BEACH AMENDING RESOLUTION NO 2007-71 TO EXPAND
THE PERMITTED USES OF THE AFFORDABLE HOUSING TRUST FUND
WHEREAS, on November 1, 2004 the City 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 income
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 certain residential projects 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;
On October 15, 2007, the City Council adopted Resolution No. 2007-71 establishing a
per project in-lieu fee, requiring the fee to be adjusted by the Cost of Living Index every January
beginning 2008, and established permitted uses of the Affordable Housing Trust Fund;
The City Council desires to amend Resolution No 2007-71 to expand the permitted uses
of the Affordable Housing Trust Fund.
NOW, THEREFORE, the City Council of the City of Huntington Beach does hereby
resolve as follows:
1. Amend Section 4 of Resolution 2007-71 as follows:
Monies in the Affordable Housing Trust Fund may be used to fund projects to create shelter
facilities or any project 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.
2. Amend Section 5 of Resolution 2007-71 as follows:
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, homeless
sheltering, land write-downs, administrative costs, gap financing, and lowering the interest-rate
of construction loans or permanent financing.
19-7615/204087 1
Resolution No. 2019-34
3. All other provisions of Resolution No 2007-71 remain in full force and effect.
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the 20`h day of May, 2019.
Mayor
ATTEST: APPROVED
City Cleik ity orney
Aty
D APPROVE ITIAT D ROVED:
-��
ger Director of Community Development
Aso/�ch� oaf aid �Z� � I'1'1 .ZC1 �Zol
19-7615/204087 2
Building Industry Association of Southern California, Inc. It
ORANGE COUNTY CHAPTER SIR
May 20, 2019
Mayor Erik Peterson PRESIDENT
Cityof Hunting�t}on Beach RICK WOOD
b• TRI POINTE HOMES
2000 Main Street
Huntington Beach CA 92648 VICE PRESIDENT
g � SUNTI KUMJIM
MBK HOMES
TREASURER/SECRETARY
RE: Agenda Item 29: Expanding Use of Government Fees ERIC NELSON
TRUMARK HOMES
IMMEDIATE PAST PRESIDENT
On behalf of the Building Industry Association of Orange County, I write to MIKE GARTLAN
strongly oppose the Resolution 2019-34 amending Resolution 2007-71, KB HOMES
Affordable Housing Trust Fund, as these changes undermine the stated
TRADE CONTRACTOR V.P.
purpose of the fund and further remove the ability of Huntington Beach to ALAN BOUDREAU
certify a Housing Element. BOUDREAU PIPELINE
CORPORATION
The Building Industry Association of Southern California, Orange County ASSOCIATE VICE PRESIDENT
Cha ter BIA/OCs a non- rofit trade association of over 1,100 member MARK HIMMEL
STEIN
P ( ) i P NEWMEYER 8 DILLIONION.
LLP
companies employing over 100,000 people affiliated with the home building
industry. Our mission is to champion housing as the foundation of vibrant and MEMBER-AT-LARGE
PETER VANEK
sustainable communities. FOREMOST COMPANIES
Resolution 2007-71 is codified in the Huntington Beach Zoning Code as section MEMBER-AT-LARGE
SEAN MATSLER
230.26(A)which states that the purpose and intent of"this chapter is to COX CASTLE&NICHOLSON,LLP
implement the goals, objectives and policies of the city's Housing Element."
Specifically, it is intended to encourage"low- and moderate-income housing ... EXECUTIVE OFFICER
to meet its regional fair-share requirements for construction of affordable STEVE LA MOTTE
housing." To achieve this, any home builder creating three or more new homes
is subject to an extraction requiring that a"minimum of 10%of all new
residential construction shall be affordable housing units."
With this understanding, homebuilders in Huntington Beach have
participated in a program with the stated purpose of furthering Housing
Element requirements and increasing the production of homes within the city.
While studies have shown that Inclusionary Zoning often results in an outcome
contrary to its purpose, the intent of the written legislation is clear. 24 Executive Park,Suite 100
The proposal before the Council will abandon the premise of the existing Irvine, California 92614
Ordinance and instead raid an established fund for purposes outside the scope of 949.553.9500 1 biaoc.corn
housing creation and outside Housing Element compliance. While the desired
amendments are laudable, an attempt to gut the fund dedicated to meeting
State mandated housing product' y� d scrutinyfrom the
Department of Housing and Cohl 1 etyris the city at
undue risk.
Meeting
Agwdm bmNo- c)'lCis- s�yl
Using 230.26 (Affordable Housing)to create"shelter facilities"for homeless clearly sends a
message that Huntington Beach is not working towards meeting Regional Housing Needs
Assessment goals and is in fact moving away from attempts at compliance. Efforts must be
undertaken to address issues of homelessness in Huntington Beach but the first place to look
for funding is not in an account dedicated to housing production,no matter how misguided
the underlying policy creating that fund may be.
To address the growing homelessness concerns in Orange County, BIA/OC was proud to join
the City of Huntington Beach in support of Assembly Bill 448. This important legislation has
created a housing trust for the County of Orange that will increase our ability to capture
funding, from the State, for the deeply important purpose of addressing homelessness. This
voluntary legislative approach creates a funding mechanism that will not unduly target one
industry for funding and can be a significant tool moving forward.
With this in mind,the Building Industry Association of Orange County strongly opposes the
proposal before you that attempts to redefine the City's Affordable Housing policy. These
changes will create undue harm and stand in stark contrast to any acknowledgment of the
pressing housing crisis the region faces.
Alternative funding opportunities exist. It is of the utmost importance that Huntington Beach
not send a message that the City has no intention of meeting the requirements of a certified
Housing Element by raiding a fund dedicated towards increasing housing opportunity and
compliance.
We appreciate the many challenges facing the City and, as always, we offer our assistance
in finding solutions that will benefit the entire community.
Thank you for your thoughtful consideration
Respectfully,
Steven C. LaMotte
Chapter Executive Officer