July 9, 2001
California Housing Council
c/o Thomas R. Larmore, Esq.
Harding, Larmore, Kutcher & Kozal
1250 Main Street, Suite 300
Santa Monica, California 90401

RE: Proposed Pasadena Inclusionary Housing Ordinance

Dear Mr. Larmore:

Kosmont Partners is in the process of reviewing the City of Pasadena’s proposed Inclusionary Housing Ordinance (IHO) as well as several reports on the impact of inclusionary housing in Pasadena prepared by Keyser Marston Associates in April 2001 and various other City documents relating to their housing policy.
Although all aspects of the review have not been completed, Kosmont Partners has made the following determinations. Compared to housing market conditions without IHO, upon the enactment of the proposed IHO and for as long as it is in force, the following significant impacts will result:
A. There will be a permanent reduction in the value of land suitable for the future development of multi-family housing; less multi-family development will occur over the long term; the rents and purchase prices of housing in Pasadena will increase more rapidly; and the housing stock will become more polarized at the high and low ends of the rent and price spectrums.
B. IHO constitutes a deviation from the City’s current Housing Element (HE) and will create pressures that act counter to achieving the City’s Regional Housing Needs Allocation (RHNA).
C. Although the production of market rate housing is likely to exceed the RHNA goals for 2005, the adverse impact of the enactment of IHO on total housing production is likely to hinder Pasadena’s ability to meet its RHNA goals for affordable units.
D. While Pasadena’s recent significant multi-family development has been concentrated in the commercial districts (with several projects voluntarily including very-low-income units under State density bonus incentives), such development is likely to decline as it becomes less competitive with commercial development alternatives.
601 S. Figueroa Street Suite 3550 Los Angeles California 90017 ph 213.623.8484 fx 213.623.8288 www.kosmont.com
California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 2 of 12 E. In addition to being inconsistent with the current HE, the proposed in-lieu fee program constitutes a disincentive in that it is a new burden on future development of multi-family housing in Pasadena and (being derived from an arbitrary percent of required affordable units) it lacks a nexus with the impact that new housing may have on the need in the community for affordable housing.
These impacts have not been clearly or thoroughly discussed in the debate over IHO, nor have they been explained in any of the several economic analyses commissioned by the City. It is extremely important that the City Council be aware of these impacts as it deliberates over whether to enact the proposed IHO. The reasons for each of these impacts compared to a market without IHO are discussed in the following sections.
As a context for that more detailed discussion of the impacts, it is useful to identify the basic provisions of the proposed IHO. In general terms, they are as follows:
1. IHO applies to new multi-family projects of 10 or more units in size.
2. Rental projects must provide for a minimum of 10% of the units to be affordable to low income households and 5% of the units to be affordable to moderate income households.
3. Ownership projects must provide for a minimum of 15% of the units to be affordable to low or moderate income households.
4. Rather than providing the affordable units on-site, the affordable housing requirement can be satisfied by the construction of the requisite number of units off-site, donation of land for building the requisite number of affordable units, or the payment of an in-lieu fee derived from the difference between the value and cost of the requisite number of affordable units.
There are, in fact, two largely similar drafts for the IHO under consideration. Any IHO would be implemented by a combination of ordinance and resolution by the City Council.
A. GENERAL IMPACT OF INCLUSIONARY HOUSING PROGRAM
Compared to the housing market conditions that would prevail without IHO, the following significant impacts will occur if the proposed IHO is implemented in Pasadena.
1. The value of existing properties as sites for new housing will be significantly and permanently reduced.
2. The economic burden of this reduction in value will not be borne by future developers of projects. Rather, it will be borne by the current owners of properties that may at some time in the future be converted into sites for new development.
601 S. Figueroa Street Suite 3550 Los Angeles California 90017 ph 213.623.8484 fx 213.623.8288 www.kosmont.com
California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 3 of 12 3. The ability of housing developers to compete with commercial developers for building sites will be significantly and permanently degraded.
4. Properties with existing uses or improvements will have to decline in value further or deteriorate more before it becomes economically rational for them to be converted into sites for new housing.
5. Over the near, intermediate and long-term, fewer properties in Pasadena will be converted to sites for new housing projects.
6. Fewer new housing projects will be built, and the total number of new housing units produced in Pasadena will be lower.
7. The lower number of new housing units produced in Pasadena will consist of a mix that is more polarized in terms of value and rental rate with fewer units in the middle value range.
8. The pricing (i.e., value and rental rates) of existing housing units in Pasadena will increase more rapidly, and those units presently priced in the affordable range (and not restricted by law to remain so) will rise more quickly above the affordable range.
9. The lower total number of housing units being produced, the more rapid increase in value or rents of the existing housing stock, and the shift of the new market rate units being produced to a higher value range will impede Pasadena’s ability to meet its regional housing goals.
A key underlying factor in these impacts is the fact that Pasadena is effectively built-out with virtually no land that has not already been improved and placed in use for residential or other purposes. This means that any significant new development in the future will take place on properties that have become less valuable in their existing use compared to their value as a site for a new housing project. It is that economically rational trade-off that will determine how many new housing sites are available in Pasadena in the future.
Permanent Relative Site Value Reduction
Compared to the value without IHO in place, the value of any property used as a site for new housing development after the adoption of IHO will be substantially less. The percent reduction estimated by KMA for new rental projects is nearly 30% in the area where major new residential development is focused in Pasadena. This drop in value is caused by the large reduction in potential rental income or sales prices for the new units resulting from the inclusion of units that must be affordable, and therefore sell or rent for less than the market would determine. Although not legally the same as a tax, imposition of IHO will have the same economic effect as the imposition of a City transfer tax on all future sales of properties as sites for new housing development, at a tax rate equal to the projected reduction in land
601 S. Figueroa Street Suite 3550 Los Angeles California 90017 ph 213.623.8484 fx 213.623.8288 www.kosmont.com
California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 4 of 12 value. The burden of that effective tax will fall on the seller of the property, not the buyer (i.e., developer).
This relative difference between the value of a new housing site with and without IHO in place will be permanent. There will not only be an initial drop in the value of these potential sites when IHO is enacted. At any time in the future a differential will still persist as long as there is a significant spread or differential between the market level rents and sale prices for the new units and the “affordable” level of rents and sale prices.
The brief discussion on page 2 of the April 9, 2001 report by KMA states that the impacts of IHO will “diminish in importance” over time and that “achievable land prices” will “adjust accordingly”. A statement about the potential fiscal impact of the enactment of IHO on page 3 of the City Council Agenda Report No. 10.A.2 dated June 25, 2001 appears to allude to that discussion. Exactly what this diminution of importance, achievability of pricing and adjustment is supposed to mean in economic terms is not clear. What is clear is that at any point in time after the enactment of IHO and for as long as it remains in effect, sites for new development will have a lower value than they would without IHO. The amount by which those values will be lower is a function of the magnitude of the difference between the market rents and sales prices for new units on the one hand and the affordable rents and sales prices on the other hand.
To the extent values for new residential sites increase over time with IHO in place, they will be increasing from a “base” below the value immediately before IHO was enacted. Furthermore, they will be rising to a value that is still below the value that would prevail without IHO. It is important to understand that any sort of speculation about how long it might take values to “recover” (i.e., rise in nominal but not necessarily real economic terms) to the level immediately before IHO was first imposed is essentially meaningless. Worse yet, it is misleading if used as any sort of rationale for making public policy decisions on housing matters.
The only reason for which IHO may “diminish in importance” in the future would be a narrowing of the difference between the market rents and sales prices for new units and the affordable rents and sales prices. Not only is that unlikely to occur, but because IHO will constrain the amount of new housing built, IHO will in fact exacerbate that difference over the long run.
Incidence of the Economic Burden of IHO
The burden of the significant drop in value of sites for new housing will be borne by two groups. It will not be borne by the development community per se. It will be borne by those persons in Pasadena who, at the time IHO is first implemented, are owners of properties that may at some time in the future become the site of a new housing development. Over the long term, the burden will also be borne in part by renters and future purchasers of condominiums in Pasadena who will pay higher market rents and purchase prices.
601 S. Figueroa Street Suite 3550 Los Angeles California 90017 ph 213.623.8484 fx 213.623.8288 www.kosmont.com
California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 5 of 12 Once IHO is in place, developers will lower the prices they otherwise would pay for a site to the point they still earn their required rate of return on the investment, given the level of risk and other factors involved. If, at the extreme, the land price would have to be reduced to less than zero for them to earn their required return on the development activity, they will leave the market and develop in other markets outside of Pasadena where their required return can be earned.
Those persons that own properties when the IHO is first implemented will, after that point in time, have property that is significantly reduced in value if it is sold as a site for new housing development. Anyone to whom they might sell that property in the future for new housing will be aware of the reduction in value compared to the value without IHO in place and will offer to pay a price low enough to assure that they as a developer will be able to earn a required rate of return on the investment.
It is very important to understand that implementing IHO will not reduce the rate of return that housing developers require and actually earn in the future in Pasadena. Those developers will merely adjust (i.e., lower) the price they are willing to pay for a site. If lowering the price of a site to zero still does not enable them to earn their required rate of return, they will leave the housing market in Pasadena. The only “developers” who will bear a part of the burden of IHO are those who happen to have already purchased sites for their projects but are not so far along in the development process that they are exempt from IHO’s provisions. In that sense they are no different from any “non-developer” owner of property when IHO is implemented and who bears the economic burden of the program.
Over the long run, the implementation of IHO will result in less new housing being constructed in Pasadena than without IHO. Thus, there will be fewer units to meet the demand for housing in the City. Unless implementing IHO somehow also causes a reduction in demand for housing in Pasadena, those fewer units will have higher rents and sales prices.
Degraded Competitive Position with Respect to Non-Residential Land Uses
Many new housing projects are built in areas where non-residential uses are also permitted. Consequently, housing developers in Pasadena must often bid for sites against the developers of other types of land uses such as retail, office and hotel. To the extent the value of land as a site for new housing projects is permanently reduced with IHO in effect, compared to the value without IHO, the ability of those housing developers to compete with the developers of other land uses will be permanently degraded.
This is not to say that the developers of the other land uses will necessarily be able to out bid developers of new housing. However, it does mean that any margin the housing developers now enjoy will be reduced or perhaps eliminated. If the value for a property as a site for housing development is now generally higher than the value for other uses, the imposition of IHO will mean that the value for the other uses will not have to rise as high in the future before it becomes higher than the housing value, and non-residential development displaces housing developments in areas where it is permitted.
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California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 6 of 12
Increased Deterioration Before Properties are Converted to New Housing
Compared to their value before IHO is enacted, after IHO is implemented properties with existing improvements will not be worth as much as sites for new housing projects. This means that before it becomes economically rational for an owner of such a property to sell to a new housing developer, the value of the property in its existing use would have to be lower than without IHO in effect. This means that a property with existing improvements will have to become more deteriorated or more functionally obsolete before its value falls to the point at which the owner would be better off economically to sell it as a site for new housing development.
In the future in Pasadena, virtually no new housing projects will be built on land that is not already in some alternative use. With IHO in effect, those properties and improvements will deteriorate further than in the past before they are sold to new housing developers. Consequently, more properties in the City will deteriorate to a more dilapidated condition over a longer period of time before being converted into a site for new housing.
Overall Reduction in Housing Development in Pasadena
Because the prices that developers of new housing projects will be able to afford to pay for sites will be lower with IHO in effect compared to without, over the long term they will be able to induce fewer owners of existing properties to sell to them. This is because it will be economically rational for more property owners not to sell their property to developers of new housing and to either hold the property in its existing use for a longer time or to sell to the developer of another type of land use who may be able to pay a higher price. With fewer sites entering the production stream, fewer new housing projects will be developed. With fewer new housing projects being developed, there will be an overall reduction in the number of new apartment and condominium units produced in Pasadena.
Polarization of the Housing Stock in Pasadena
With IHO in effect in Pasadena, the mix of units that are developed will not be the same as without IHO. Developers of the new projects that are built will necessarily have to provide the requisite number of “affordable” units called for by IHO. Those mandatory affordable units in each project will displace market rate units that otherwise would have been built. Because rental and for-sale units at the higher end of the rent and price range tend to have higher profit margins, developers will have no incentive to reduce the proportion of those upper-end market rate units built. They will in fact reduce the number of lower and middle range market rate units built.
Consequently, over the long term, the imposition of IHO will result in there being fewer new lower and middle range market rate rental and for-sale units of housing built in Pasadena. The overall housing stock in general, and the new housing units produced in particular, will gradually become more polarized at each end of the value spectrum with fewer units in the middle range.
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California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 7 of 12
More Rapid Increase in Future Residential Rents and Sales Prices
Because the number of new housing developments will be lower with IHO in effect than without, over the long term, the total number of apartments and condominiums in Pasadena will be lower with IHO. Unless the imposition of IHO somehow also simultaneously reduces demand for housing in Pasadena, this means that with IHO in effect the same demand for housing will be chasing a lower number of housing units. This will inevitably lead to higher rents and sales prices for those fewer units in Pasadena (not constrained by ordinance to rent or sell at affordable rates) than would prevail for a larger number of units if IHO were not in effect and constraining the supply of housing in the City. With the rents and sale prices for housing units (that are not legally constrained to affordable levels) rising more rapidly with IHO than without, the number of those units that rent or are priced at affordable levels without legal constraint will diminish more rapidly than without IHO.
IHO as a Governmental Constraint on Meeting Regional Housing Needs
Over the long run and in comparison to the housing market without IHO, the imposition of the proposed IHO in Pasadena will reduce the total number of new housing units developed, cause a more rapid increase in market rents and sale prices for market-rate housing units, and lead to a polarization of the housing stock at the upper and lower ends of the value spectrum. By these effects on the housing market, the imposition of IHO by Pasadena may well constitute a governmental constraint on the City being able to meet its fair share allocation of the Regional Housing Needs Assessment (RHNA).
B. INCLUSIONARY HOUSING ORDINANCE AND HOUSING ELEMENT
Pasadena’s current HE was approved by the City in September 1989. The HE describes 36 separate programs by which the City will promote meeting its housing production goals. Those include instituting various amendments to the Zoning Code, establishing affordable housing linkage fees on commercial development, introducing new financing programs and more stringent Zoning Code enforcement. Two key objectives of these programs are to encourage the development of new housing (both owner-occupied and rental) as well as the improvement of the existing housing stock.
An inclusionary housing ordinance is not a part of the programs in the approved HE. As already indicated, the enactment of the proposed IHO will reduce the total amount of new multi-family housing that is developed. This effect runs counter to one of the goals of the HE and in fact constitutes a governmental constraint on total housing production and an impediment to achieving the City’s RHNA.
Furthermore, the enactment of the proposed IHO will also extend the economic life and delay the conversion (through demolition and the building of a greater number of new replacement units) of that portion of the existing housing stock in the City that is the most deteriorated. Consequently, because enacting IHO will cause dilapidated housing to remain
601 S. Figueroa Street Suite 3550 Los Angeles California 90017 ph 213.623.8484 fx 213.623.8288 www.kosmont.com
California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 8 of 12 a part of the total housing stock for a longer period of time, the HE goal of improving the quality of the existing housing stock will be impeded.
It is curious to note that in a draft of a revised HE that has had some circulation recently, the IHO and the prospect of affordable housing impact fees on new commercial development are presented in a section titled “Affordable Housing Incentives”. Both of those programs would constitute new burdens that would decrease the economic incentive for owners of existing underutilized properties to convert them by selling as sites for new residential or commercial development. Consequently, in no sense of the word, does either constitute an incentive of any type. It would be more appropriate to present them in a section that includes other governmental impediments to total housing production and commercial development.
C. IMPEDIMENT TO ACHIEVING RHNA AFFORDABLE GOALS
The City of Pasadena 2000-2005 Housing Element Needs Assessment was prepared in May 2000. It presents the City’s 1998-2005 RHNA goals for the four household income groups. Those goals are as follows:
Income Units
Very Low 462
Low 284
Moderate 338
Upper 693
TOTAL 1,777
The total number of affordable units in the RHNA is 1,084. According to the City Planning Department, from 1998 through 2000, approximately 403 new affordable units were placed into use or were in the construction or planning process. That leaves a deficit of approximately 680 affordable units. The Needs Assessment points out that the City has an “adequate” number of sites (primarily underutilized) to accommodate this housing requirement. However, having sites theoretically available for additional or denser new development is not the same as an indication that the new development has any likelihood of occurring.
Based on the number of units completed and currently in the planning process, the number of new market rate units will exceed the RHNA goal. However, there are no clear indications that the remaining affordable units will be constructed or that more will be constructed with IHO than without. The affordable units built since 1998 have been provided without the mandate of the proposed IHO, some as a result of using the State 25% density bonus program. If the City were to rely on enactment of the IHO to “generate” only half (i.e., 300) of the remaining affordable units called for by the RHNA by 2005, it would be necessary for a total of approximately 2,000 more new multi-family units to be developed
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California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 9 of 12 while subject to the IHO requirements. Given the recent level of production and the number of new units coming into the market in the near future, that would be an ambitious total without the deterrence to new multi-family housing development that the enactment of IHO would constitute.
With IHO in place, and the impediment it imposes, it would be even less likely that that amount of new multi-family housing would be developed. Consequently, while it is clear that total new multi-family housing development will be less with IHO in place than without, there is no persuasive evidence that the number of affordable units produced with IHO in place (15% of a lower total number of units) will be more than the number produced without IHO.
D. REDUCED RESIDENTIAL DEVELOPMENT IN COMMERCIAL AREAS
In recent years, the downtown or central district of Pasadena has been the location of the preponderance of the City’s new multi-family housing development. Depending on the stage of planning included, in the range of 2,500 units fall into that category. Most of that development is on land that is zoned for commercial development. If IHO is enacted, the development of new multi-family housing in that important area will be impeded.
Significant Residential Development Standards
There are several City Zoning Code provisions that apply to residential development which bear mentioning. The City of Gardens standards allow a discretionary 25% density bonus for meeting certain design standards relating principally to open space. However, in practice, other physical design standards, such as maximum height designations and set-backs, limit the number of units that can be constructed on most parcels. The result is that it is almost unknown for adherence to the City of Gardens standards to result in any bonus units actually being incorporated into a project. In fact, it is more likely that the physical design standards will limit the number of units to less than the maximum density permitted. In a similar fashion, the City’s 50% density bonus is also effectively not an option for the vast majority of sites.
However, in the City’s central district, if a project has mixed uses, with commercial space on at least a portion of the ground floor and residential units in the remaining space, the entire project can be constructed in accordance with commercial design standards. This usually results in an increase in the number of units that physically can be accommodated on a site.
Recent Residential Projects with Affordable Units on Commercial Parcels
Several recent apartment projects in the central district (two under construction and one in the working drawing stage) give an indication of the type of new multi-family development that is being developed on commercially zoned land and which have included affordable units without resorting to IHO. The basic parameters of the three projects are shown in Exhibit 1.
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California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 10 of 12 Each was built on a commercially zoned parcel and included commercial space on the ground floor. This feature allowed each entire project to be designed under the commercial guidelines. Consequently, it was physically possible to accommodate a 25% bonus increase in the total number of units developed. The requirement that units be provided for very-low income households was able to be met and its burden off-set by the value of the increase in the number of market rate units. For example, for the East Colorado Boulevard project, 96 market-rate units would be permitted without a density bonus. Under the State’s 25% density bonus program, it was possible to develop 110 market rate units and 10 very low-income units.
The fact that the developers of these projects elect, without coercion, to take the density bonus and provide units that rent to very low-income tenants, indicates that this use generates more value for the developer than an alternative residential or commercial use. If that use generates more value, it will also result in a higher residual land value. This current observable practice on the part of developers is contrary to the suggestion in the KMA report dated April 23, 2001 that the land would be less valuable if a developer elects to follow the State’s 25% density bonus program.
Adverse Impact of IHO
The large amount of recent development of multi-family housing in commercial areas of Pasadena demonstrates that residential developers have been successful at out-bidding developers of other uses for sites that come on the market. Whatever the margin by which residential developers have been able to out-bid non-residential developers, the enactment of IHO would cause it to fall or even vanish.
KMA suggests that the reduced value of land for residential use or development upon the enactment of IHO is still higher than the price commercial developers would be willing to pay. However, there are several potential owner-users currently exploring the Pasadena market for commercially zoned properties that are prepared to pay in the range of $100 per square foot of land. Furthermore, the current market for commercial land (e.g., for retail, office or hotel development) is at a lower point in its cycle than the market for residential land. As the commercial land market moves through its cycle, residential and commercial land values will likely converge. With the added adverse impact on the value of land for residential use after the enactment of IHO, the bidding advantage that residential developers have recently held could disappear entirely. That could result in a virtual cessation of new multi-family residential development in Pasadena in the very area where the bulk of it has been occurring and where units for very low-income tenants have been included on a voluntary basis under the State’s density bonus program.
E. IN-LIEU FEES
Kosmont Partners reviewed four reports prepared by KMA in April 2001, the text of two proposed versions of IHO, a City of Pasadena City Council agenda report on IHO dated June 25, 2001, and several documents relating to the affordable housing impact fees in effect in the City of Santa Monica.
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California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 11 of 12
Approach to Computing In-Lieu Fee
An analysis of the KMA reports indicates that a nexus analysis that estimates the extent to which new multi-family housing development in Pasadena creates a burden on the community for affordable housing was not performed. In other words, rather than estimating the cause and effect between the development of new market rate multi-family housing and a resulting need for affordable housing, KMA began with the presumption that a certain ratio of “affordable” units would be “required” in new apartment or condominium projects. This makes the recommended fee an “in-lieu” fee, not a “nexus” or “linkage” or “impact” fee.
An affordable ratio of 15% was presumed. Several housing sub-areas in Pasadena were studied to determine the “affordability gap” for moderate and low income households located in each. The resulting affordability gap in dollar terms is the initial step in in-lieu fee computation. The affordability gaps calculated vary by sub area for both apartment and condominium projects. For condominiums, they range from zero in the northwest to $254,000 in the west sub-area. The calculated affordability gap is described as the “Inclusionary Housing Obligation Costs”. However, it fails to establish any nexus or correlation between new market-rate projects and a need for affordable housing.
After deriving the various affordability gaps, a 75% factor is applied to each to derive the actual fee schedule. No specific rationale is given for selecting 75% as the value for the factor. If the affordability gaps are computed correctly and a 75% factor is applied to establish the in-lieu fee amount, the question arises as to why a developer would ever build affordable units on-site as opposed to paying an in-lieu fee that is equal to only 75% of the burden of the on-site option.
In summary, the KMA analysis did not attempt to estimate the impact of new market rate condominium or apartment projects on the need for affordable housing in the community. Rather, it started with the City-directed specification of a 15% affordable housing requirement, calculated the “affordability gap” of inclusionary units in various housing sub areas in Pasadena, and applied an arbitrary 75% factor to derive the in-lieu fee amounts. The fees that result have no logical relationship to the burden that a new market rate development places on the community for affordable housing.
Affordable Housing Impact Fees
The approach of establishing a nexus between new multi-family housing development and a consequent need in the community for affordable housing has been used and very thoroughly studied in the City of Santa Monica. In Santa Monica, developers of apartments and condominiums are required to pay an affordable housing “impact fee” based on the need for affordable housing generated by the market rate housing development. This approach is fundamentally different from the approach being recommended as part of the IHO.
601 S. Figueroa Street Suite 3550 Los Angeles California 90017 ph 213.623.8484 fx 213.623.8288 www.kosmont.com
California Housing Council Pasadena Inclusionary Housing July 9, 2001 Page 12 of 12 The Santa Monica approach has been documented in a series of analyses by Hamilton, Rabinovitz & Alschuler, Inc. (“HR&A”). The HR&A nexus study that measured the impact and derived a fee schedule used the following four-step approach:
1. Estimate household income and spending for each new market rate project.
2. Estimate the employment impacts of household spending for each new market rate project.
3. Estimate the low-income households component of the employment impacts of household spending for each new market rate project.
4. Estimate a fee to offset the unsupportable cost of the affordable housing demand created by the new market rate housing development.
This impact approach is quite different from the approach used by KMA that is based on the requirement for an arbitrary ratio of affordable units in new multi-family housing developments.
Comparison of Affordable Housing Fees for Selected California Communities
Kosmont Partners reviewed the affordable housing impact and in-lieu fees for a host of communities in California as applied to two prototypical multi-family housing developments:
1. A 15-unit condominium project with an average unit size of 1,500 square feet; and
2. A 50-unit apartment project with an average unit size of 900 square feet.
The results of the comparison are presented in Exhibit 2. The in-lieu fee for a prototypical condominium project located in the west sub-area is $315,000. This figure exceeds by 27% the next-highest fee charged, $247,725 by the City of Santa Monica. The in-lieu fee for a prototypical apartment project in the Downtown sub-area, $675,000, is approximately 25% higher than the next-highest city (West Hollywood). While it is acknowledged that Pasadena charges no in-lieu fee for condominiums or apartments in the northwest sub-area, the fee schedule for other sub-areas are clearly in excess of the fees in the other cities for which data was collected.
Sincerely,
Ross S. Selvidge, Ph.D.
Senior Vice President
Kosmont Partners
601 S. Figueroa Street Suite 3550 Los Angeles California 90017 ph 213.623.8484 fax 213.623.8288 www.kosmont.com