HomeMy WebLinkAbout1993-09-21; City Council; 12402; ADOPTION OF INCLUSIONARY HOUSING IN-LIEU FEE, AND FORMULA FOR CALCULATING IN-LEIU FEEc
u AB# J2#@@&- TITLE: ADOPTION OF INCLUSIONARY HOUSING IN-LIEU
FEEl AND FORMULA FOR CALCULATING IN-LIEU FEE MTG. 9/21/93
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pt4 k 7 CIT*F CARLSBAD - AGEN~ BILL
RECOMMENDED ACTION:
Hold a public hearing and ADOPT Resolution No. 93-26* , se the Inclusionary Housing In-Lieu Fee, and formula for calculatir In-Lieu Fee,
ITEM EXPLANATION
The Inclusionary Ordinance (ZCA 91-06) mandates that a minimum c
of all future residential units developed within the City sha
reserved and affordable to lower-income households. This inclusionary requirement shall apply to all new projects prop market-rate residential dwelling units.
Section 21.85.050 ofthe Inclusionary Ordinance specifies that ce
classes of residential projects may satisfy lower-income inclusi
other in-lieu contribution. Basically, the class of projects a1 to pay the in-lieu fee rather than constructing lower-income unit projects with six or fewer dwelling units. All residential develc subject to in-lieu fees do however have the option of construc lower-income unit(s) to satisfy their inclusionary requirements
While it would be preferable for developers to construct the req inclusionary dwelling units on the ground as a first prioi imposing this requirement on those classes of projects listed i
could pose an onerous economic burden. Specifically, : developments of 6 units or less may not be economically viable i~
inclusionary housing requirement could only be satisfied by development of the unit on the ground. In addition, requiring 1
of affordable housing to be constructed for every 6 or fewer mz
rate units developed would result in an inclusionary hol
requirement of greater than 15%. Similar to other exis Inclusionary Housing programs this in-lieu fee option is regardc
equitable and a reasonable alternative. It is estimated that
than 10% of future residences developed within the City woul subject to the In-lieu Fee.
An economic study (see Exhibit 114t0) was prepared by an Ad
Committee of City staff and for profit and non-profit resider
builders in order to identify the specific dollar Value of the In-
Fee. TO summarize, the study quantified the typical cost! developing an attached market-rate dwelling unit in Carlsbad identified the monetary difference between this cost of develoy: and the amount that a lower-income household could afford to pal housing, The study, as revised for 1993 (see Exhibit 'l5l1), concl that the monetary difference (or subsidy) required to maintain unit as affordable to a lower-income household for a period o
years is equal to $79,994.75/unit.
requirements through the payment to the City of an in-lieu fc
1 0 *
1 PAGE 2 OF AGENDA BILL NO. 1% 40 s
7. r cd* 1
The In-Lieu Fee to be paid per market rate dwelling uni recommended to be equal to 15% of the subsidy required to affordable to a lower-income household, one newly constructed, ty attached dwelling unit for a 30 year tenure. Fifteen percent of the required subsidy equates to an fn-lieu fee of $12,00O/m
rate unit (see Exhibit 1r311).
The in-lieu fee as proposed, complies with the requirement California Government Code Section 66001 et.seq. The inform
(economic study) upon which the in-lieu fee is based has been
available to the public for review and comment,
The formula for calculating the dollar value of the In-Lieu F
included on Exhibit 11210e
Consistent with the formula included on Exhibit "211, the IncPusi Housing In-Lieu Fee would be updated periodically by the City Cou
The Inclusionary Housing In-Lieu Fees would be paid to the City a time of building permit issuance. All in-lieu fees would be depo
in a Housing Trust Fund and used by the City to provide fu
assistance for the provision of affordable housing,
FISCAL IMPACT
There will be costs to the City associated with the administrati the In-Lieu Fees through the Housing Trust Fund. is recommending that a portion of the In-Lieu Fees collect€ allocated for City In-Lieu Fee administrative services.
EXHIBITS
Accordingly,
1. City Council Resolution No. 93e2&a 2. In-Lieu Fee Formula
3. Inputs to In-Lieu Fee Formula Variables
4. City of Carlsbad 1991
5. Affordability Gap Revisions for 1993
Economics of Developing Affordable Housing,
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RESOLUTION NO. 93 -268
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF CARLSBAD, CALIFORNIA ESTABLISHING AN INCLUSIONARY HOUSING IN-LIEU FEE AND FORMULA
FOR CALCULATING THE IN-LIEU FEE
WHEREAS, the City of Carlsbad has adoptec
Inclusionary Housing Ordinance in order to enable the achiev
of it's Regional Share housing objectives for lower-incomc
moderate-income units; and
WHEREAS, the Inclusionary Housing Ordinance man
that a minimum of fifteen percent (15%) of all residential
in any master plan, specific plan or residential subdivisi
reserved and affordable to lower-income households; and
WHEREAS, the Inclusionary Housing Ordinance spec
that all residential market rate dwelling units resulting frc
construction of rental or for-sale units shall be subjec
inclusionary requirements; and
WHEREAS, based upon a comprehensive strategy f ormu
to address the City's affordable housing needs over the sl-
id-, and long-term buildout of the City, specific Inclusi III
requirements (i.e.; construction of affordable units, paymc
in-lieu fees or payment of inclusionary housing impact fees]
been identified for various classes of residential projects
WHEREAS, in order to be consistent with the Hc
Element of the General Plan and the Inclusionary Hc
Ordinance, the following classes of residential projec
permits shall be eligible to satisfy Inclusionary hc
requirements for lower income households through the paymt
the City of an In-lieu Fee:
(1) Any residential project ( i. e. ; tentative
tentative map for the conversion of apartments to air
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condominiums, parcel map, planned unit development,
development plan, conditional use permit, residential mobile
park permit or redevelopment permit) of six (6) dwelling uni
less, for which the application was deemed complete on or
the effective date of the Inclusionary Ordinance, and is apF
after the effective date of the Inclusionary Ordinance;
(2) Any residential tentative map or parcel
revision, including a tentative map revision for the convers:
apartments to air-space condominiums, of six (6) dwelling un:
less, for which the application was deemed complete on or
the effective date of the Inclusionary Ordinance, and is apy
after the effective date of the Inclusionary Ordinance;
(3) Any residential tentative map or parcel map (
(6) dwelling units or less, approved on or after the effc
date of the Inclusionary Ordinance, and is subsequently apy
for extension after the effective date of the Inclus:
Ordinance;
(4) Any residential planned unit development,
development plan, conditional use permit, residential mobill
'park permit or redevelopment permit for six (6) dwelling un
less, approved on or after the effective date of the Inclus
Ordinance, and subsequently approved for amendment afte
effective date of the Inclusionary Ordinance;
(5) Development of six (6) or fewer new mobilc
pads in a mobile home park, approved on or after the eff
date of the Inclusionary Ordinance.
WHEREAS, the in-lieu fee to be paid for each marke
dwelling unit would be equal to fifteen percent (15%) (
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subsidy required to make affordable to a lower-income house
for a thirty (30) year tenure, one newly constructed, ti
attached housing unit; and
WHEREAS, the required subsidy 1s based upon the fir
of a 1991 economic study, ltEconomics of Developing Affoi
Housingtt, prepared by an ad hoc committee composed of City
and private for-prof it and non-prof it developers ; and
WHEREAS, the findings of this 1991 economic stud]
been updated for 1993; and
WHEREAS, the formula for calculating the dollar va
the in-lieu fee is included on Exhibit tt2tt; and
WHEREAS, based upon this formula, and current est1
of the variables contained therein, the dollar value of tk
Lieu Fee would be $11,485.00 (see Exhibit It3lt); and
WHEREAS, consistent with the formula included on El
91219 , the dollar value of the in-lieu fee would be adjustec
time to time by resolution of the City Council; and
WHEREAS, the in-lieu fee would be assessed again:
market rate residential units subject to this fee; and
WHEREAS, the in-lieu fee would be required to be p(
the City at the time of building permit issuance or prior 1
recordation of a final map and/or issuance of certifica
compliance for the conversion of existing apartments to air-
condominiums; and
WHEREAS, the In-lieu Fee(s) paid to the city WOI
deposited in a Housing Trust Fund and used for the purpc
providing funding assistance for the provision of affoj
housing and reasonable costs of administration.
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NOW, THEREFORE, BE IT RESOLVED by the City Counci:
city of Carlsbad as follows:
Ill. That the method for calculating the dollar t
the Inclusionary Housing In-Lieu Fee, established by Municil
Title 21, Section 21.85.050 In-Lieu Contributions, shall bc
formula shown on Exhibit I12l1, a copy of which is affixed 2
a part hereto; and
2. That the input values for the variables contz
the formula given in Exhibit 11311 shall be, and the rE
Inclusionary Housing In-Lieu Fee shall be, as shown in Exhi:
a copy of which is affixed and made a part hereto, and
3. The formula, input values, and fee shall
effective 60 days after the adoption of this resolution, i
4. That the input values for the variables
formula and the In-Lieu Fee would be reviewed annually and
by resolution of the City Council.ll
PASSED, APPROVED AND ADOPTED at a regular meetinc
city Council of the city of Carlsbad, California, on the 2
of SEPTEMBER , 1993, by the following vote, to wit:
AYES:
NOES : None
ABSENT: None
Council Members Lewis, Stanton, Kulchin, Nygaard,
ATTEST:
ALEITHA h& 4.A L. RAUTENKRANZ, City C&kk (SEAL)
-m m 7' . 'I 1
IN-LIEIJ FEE FORMULA
X - - (A + B + C + Dl E
4
X - - Dollar Value of In-Lieu Fee.
A = The capital subsidy required to develop within the City of Carlsbac
assisted 2 BR/1 BA, 850 sq. ft. condominium unit, and deed restrict the
as affordable to a low income family of 3 for a 30 year tenure. *
The capital subsidy required to develop within the City of Carlsbac
assisted 3 BR/2 BA, 1,100 sq. ft. condominium unit, and deed restric
units affordable to a low income family of 4 for a 30 year tenure.
The capital subsidy required to develop within the City of Carlsbad
assisted 2 BR/1 BA, 850 sq. fi. apartment unit, and deed restrict the UI
affordable to a low income family of 3 for a 30 year tenure.
The capital subsidy required to develop within the City of Carlsbad
assisted 3 BW2 BA, 1,100 sq. ft. apartment unit, and deed restrict the
as affordable to a low income family of 4 for a 30 year tenure. *
B =
t
C =
D =
E - - 15% Inclusionary Requirement = .15
*" Economics of the Development of Affordable Housing", City of Carlsbad, Decei
4991.
Unit
Size
2BR/SIZE/1 BA
850 SQ.FT.
3BW2BA
1,100 SQ.FT.
Income Capital Subsidy Required
Level
Low $63,516 $86,843
Low $62,977 $92,943
For-Sale Units Rental Unit
E ' e @ f'* <'a ,
Y
CITY OF CARLSBAD
ECONOMICS OF DEVELOPING AFFORDABLE HOUSING
Prepared by:
The Ad Hoc (Density Bonus/Inclusionary Housing) Committee
City of Carlsbad
Principal Editors:
Chris Decerbo, Senior Planner
Leilani Wines, Planning Intern
Planning Department
City of Carlsbad
2075 Las Palmas Drive
Carlsbad, California 92009
6 19/438- 116 1
December 199 1
0 c (I 1'6
Ad Hoc (Density Bonushclusionary Housing) Committee
Public Participation
Doug Avis * Benchmark Pacific
Nancy Calverley
George Havier William Lyon Companies
Paul Klukas Hillman PropertiedAviara
John McCoy Residential Builder
Gerald Messineo Hall mark Developnien t Group
Sydney Novel1 Hallmark Development Group
Michael O'Gara Multi-family Residential Builder
Jerry Rombotis Residential Builder
Sandy Sanderson
Revisions Resources (Non-Profit Organization)
Civic Center Barrio Housing Corporation (Non-Profit Organization)
San Diego County Non-Profit Federation for Housing and
FieldstoneNillages of La Costa
Com muni ty Development
Mike Stewart
George Walker Davidson Communities
City of Carisbad
Cheryl Allen Finance Department
Chris Decerbo Planning Depart inent
Jim Elliot Finance Department
Debbie Fountain
Kathy Graham
Robert Green Planning Department
Leilani Hines Planning Department
Karen Sauer
Dennis Turner Planning Department
Bob Wojicik Engineering Department
*
Housing & Redevelopment Department
Housing & Redevelopment Department
Housing & Redevelopment Department
Selected as "Facilitator" by the Ad Hoc Committee
The City of corlsbad sincerely thanks the public nzernbers of the Ad Hoc Committee for their
generous contributionr of time and experrise.
e e i-*' (J I .
U
CITY OF CTtRLSBAD
ECONO!llICS OF DE\"ELOPISG AFFORDABLE HOUSING
SC\l>lA RY
One of the primary concliisioiis of the City of Carlsbad's Revised Housing Elerr
October 22, 1991, is that there exists a large need for, but a lack of housing affordabi
households in the lower inconie groups. The Revised Housing Element contains program w
are directed at the provision of affordable Iioiisins within the City.
In order to understand the sconoiiiics of dsveiopiilg affordable housing, City staff assemble
Ad Hoc Committee coiiiposecl of inaster plan ailti in fill rssidential builders, non-profit buil
and City staff (Planning, Housing and RedsvelopIiient, Finance and Engineering Departmer
The Ad Hoc Committee prepared a report that presents an economic model regarding
development of affordable housing. The report presents one scenario for the cos
development and operation of new housing units within the City. This report does not r
specific recommendations and is inreiitied to serve as an informational tool only.
The project and assumptions ussd iii the report suve only as a model to examine develop1
costs in the City of Carisbad.
bedroom/one bath or three becirooi1v'tu.o barti units was examined.
The following are the main findings of the economic model presented in this report:
0 The costs of constructing and operating new housing units (not including devel
profit) in the City of Carlsbad are high, ranging froin $134,200 to $156,600;
0 There exists a significant gap between what a lower-income household can afford tc
for housing and the costs to produce a iitiit in Carisbad (affordability gap), ranging
over $75,000 to nearly $120,000;
The affordability gap is less costly for for-sale units than rental units;
The financial burden of the affordability gap is too heavy for only one segment o
community to bear; and
With all members of the comtiiiiiiity working creatively, cooperatively, and aggress
it is possible to overcome the affordability gap.
For the purposes of this report, a generic project of
e
0
.... W e
Table of Contents
Introduction ................................................ 1
Purpose of Ad Hoc Committee and the Report .......................... 1
Definitions ................................................ 2
Economic Model of Developing Affordable Housing ....................... 7
Housing Production Costs ....................................... 9
Homeowner Affordability Gap .................................... 11
Renter Affordability Gap ........................................ 16
Comparing For-Sale and Rental Unit Affordability Gaps .................... 19
Filling the Affordability Gap ..................................... 21
Conclusion ................................................ 26
APPENDIX A
APPENDIX B
Economic Incentives to Reduce the Affordability Gap ......... 28
Methodology for Determining Maximum Mortgage Payments and
Tenant Supported Debt ........................... 37
APPENDIX C Worksheets to Determine capital Subsidies ............... 41
APPENDIX D Inclusionary Housing Proforma Outline ................. 50
e e r.9 (I I ,
4 ..
CITY OF CARLSBAD
ECONOMICS OF AFFORDABLE HOUSING
Introduction
This report is presented as an informational tool that should be helpful in understanding
economic difficulties associated with building affordable for-sale and rental housing units wi
the City of Carlsbad. The State of California requires local governments to undertake revis
to Housing Elements every five years. Housing Elements include specific goals, objecti
policies and programs pertaining to housing. One of the primary conclusions of the Cit
Carlsbad’s Revised Housing Element, October 22, 1991, is that there exists a large need
but a lack of housing affordable to households in the lower income groups. The Hou
Element contains 50 Housing Action Programs many of which are directed at the provisio
affordable housing within the City.
The total number of lower-income affordable dwelling units projected to be developed WI
the City by July 1, 1996, through the City’s Housing Action Programs is 1400. The majc
of these affordable dwelling units are expected to be developed through the City’s prop
Inclusionaq Housing Program, which requires that a minimum of 15% of all future reside
units developed in any master plan, specific plan or qualified subdivision be affordable to lo
income households.
Purpose of Ad Hoc Committee and the Report
In order to understand the economics of the development of affordable housing, City
assembled an Ad Hoc Committee composed of master plan and infill residential builders,
profit builders and City staff (Planning, Housing and Redevelopment, Finance and Enginef
Departments).
The primary objective of the Ad Hoc Committee was to develop an economic model regar
the development of affordable housing. This model would have to: (1) quantify the typical (
of developing market-rate housing in Carlsbad; and (2) identify the monetary differ
(affordability gap) between these costs and the amount that a lower-income household c
afford to pay for housing. Finally, the Ad Hoc Committe was to consider what types of
assistance (i.e.; additional density, waivers of fees, modifications of development standard
direct subsidies) could be brought to bear to reduce this affordability gap.
1
Income Definition
L&Vd (4 - --
Low income Those households whose income is at least fifty percent but
less than eighty percent of the County median income
adjusted for household size.
Those households whose income is fifty percent or less of
the County median income, adjusted for household size.
Very low
income -
r'l fb I L 0 0
-
Lower-income households refers to both low-income and very low-income households.
Consistent with federal, state and the City of Carlsbad policy, the definition of afford
housing payments for renters and homeowners assLiines that no household should pay more
30 percmt of the gross family income for "housing payment". The term housing payment re
to the total costs of a household to obtain shelter through the rental or purchase of a dwel
unit.
For renters, the total housing rent would include the payments for the use and occupancy of
housing unit and a reasonable allowance for utilities, For home owners, the total hou' payment would include all of the following associated with that housing unit:
Principal and interest on the mortgage loan, and any associated mortgage insurance f
Property taxes and assessments; * A reasonable allowance for utilities; and
Homeowners association fees (includes propertyihazard insurance).
If no assistance is provided by a public body in the production or occupancy and use '
housing unit, affordable housing payments are pegged at the top end of each income group
Table 2). Specifically, housing payments for a low-income household are based upon 30 per
of 80 percent of the County median income, adjusted for household size. For a very-low inc
household, housing payments are based on 30 percent of 50 percent of the County me
income, adjusted for household size. However, it is important to understand that whi
dwelling unit is technically affordable to a low income household with a rent pegged at
percent of the County median income, it is in fact not affordable to other families in that incc
category whose income is below 80 percent of the County median income.
Section 50052.5 of the California Health and Safety Code defines affordable housing payml
for households of moderate and lower-incomes residing in any housing development w1
receives governmental assistance as of January 1, 1991 (see Table 2). If government assistz
is provided, housing payments for a low-income household are based upon 30 percent 01
percent of the County median income, adjusted for household size (see Tables 3 and 4).
a very-low income household, housing payments are based on 30 percent of 50 percent of
County median income, adjusted for household size.
. Governmental assistance is interpreted as any assistance in the production or occupancy and
of housing given by a public body. Housing production assistance would include such item:
Density bonus;
@
a Land donations; and
Financing/funding assistance.
Governmental assistance in the occupancy and use of a dwelling unit refers to rental assistar
Rental assistance is rent subsidies through such programs as Section 8.
Waiving/subsidizing processing and facilities fees;
3
ANNUAL AFFORDABLE HOUSING COSTS AND RENTS
Income For-Sale Units Rental Units
Level ’
LOW 30% of 70% of 30% of 80% of 30% of 40% of 30% of 80% of
median income median income median income median income
Assisted (a) Unassisted Assisted (a) Unassisted
income the County the County the County the County
(b) (b)
Very low 30% of 50% of 30% of 50% of 30% of 50% of 30% of 50% of income the County the County the County the County
median income median income median income median income
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Economic Model of DeveloDing Affordable Housing
The economic model developed by the Ad Hoc Coininittee includes specific variables
assumptions concerning each variable relative to the cost of development of housing in Carl
and the amount a lower-income household could afford to pay for housing.
It is important to understand that the dollar values generated through this model are based I
assumptions regarding each of the variables of the model. If any of the assumptions
changed, including the project description, the dollar values will change. The assumptions r
in this report are reasonable for 199 1.
PROJECT DESCRIPTION
This model will analyze the development costs for a generic two bedroom/one bath condomir
of 850 square feet and three bedrooin/two bath condominium of 1,100 square feet. The prc
site is assumed to be topographically level, without view premiums, or significant noise or
use constraints.
A density of 20 dwelling units (du’s) per acre is used although under the current GeneraI
of Carlsbad, 19 du’s per acre is the maximum density allowed within the City. This density
be achieved in two-story constriiction.
The assumed project design is standard Spanish style with a tile roof and stucco exterior.
building has some architectural treatment around the windows, patios and balconies.
structures would be two-story , conventional wood frame with no elevators, and strictly walk
All buildings and units would coniply with existing City development and design standa
policies and regulations.
Parking is assumed to be a combination of one covered parking space per unit in the foot]
of the building and another covered space (carport) within a 150’ radius, as required by
City’s Planned Development Ordinance. Guest parking would be satisfied by open par
scattered throughout the site.
COST OF DEYELOPMENT
The cost of development is equal to the sum of the following variables:
a Land costs;
0 Offsite costs; 9
a Recreation and amenities;
Landcarry;
a Onsite costs;
a Overhead costs;
Selling/Marketing costs; and
a Finance costs.
7
1 t 2, e w
The assumptions for each of these variables is further discussed in the Housing Production Costs
section of this report.
MAXIMUM AFFORDABLE HOUSING PAYMENT
The maximum affordable housing payment for a lower-income household takes into account the
the following variables:
0 Total housing allowance;
0 Property taxes;
0
0
The assumptions for these variables are further discussed in the Homeowner Affordability Gap
and the Renter Affordability Gap sections of this report.
For this model, the total housing allowance is derived on the assumption that governmental
assistance is provided (recall Tables 3 and 4). As the following analysis will indicate, the gap
between what lower income households can afford to pay for housing and what it costs to
Reasonable allowance for utilities; and
Homeowners association fees (includes propertyhazard insurance).
construct and operate such hou3ing in Carlsbad is substantial.
Furthermore, pursuant to Section 50052(c) of the California Health and Safety Code, the total
housing allowance is also derived on the assumption that a lower-income family of three will
reside in a two bedroom unit. A lower-income family of four will reside in a three bedroom
unit.
8
, 0 0 '.'I ,., .
Hotisin! Production Costs
To calculate the cost of development for both for-sale and rental units in the City of Carlst
a series of assumptions regarding the following variables was established. These varial
include:
9 Land costs;
0 Offsite costs:
9 Recreation and amenities;
0 Landcarry;
0 Onsite costs;
9 Overhead costs;
0 Selling/Marketing costs; and
b Finance costs.
It is assumed that the development cost figures for a for-sale or rental multi-family project
similar. Development cost figures are based on the assumption of the above referenced genl
project. This analysis uses average numbers that builders could encounter in the City
Carlsbad. The total development cost assumes no developer profit will be made.
Land costs have been calculated to be 520,000 per dwelling unit. This was obtained by u!
a land cost of $400,000 per acre, which is a typical cost of unimproved land within many of
Master Plan Areas of the City. Land costs for the developed downtown area or along the CI
could range anywhere from $600,000 to $1 million per acre.
Offsite costs, as discussed below; liave been placed into four categories:
0 Predevelopmen t;
0 Land development costs;
0 Processing/permit fees; and
Facilities Management Fees.
Predevelopment costs are those costs associated with preparing all required plans and rep
necessary for processing discretionary applications within the City. These costs include dol
paid to private consultants (engineers, planners and environmental consultants) to prepare Lx
Facility Management Plans, Financing Plans, tentative maps, site plans, architectural elevati
environmental studies and any other required submittals. This model assumes predeveloprr
costs of $5,000 per two bedroom dwelling unit and $5,500 per three bedroom dwelling un
9
1 b a, 0 e <
Land development costs includes anything that needs to take place on the ground in order to
generate the new shape of the site and all the underground facilitieslimprovements needed to
service the buildings. Such items include the physical construction to reshape the land (grading),
installation of sewer, water, storm drain, dry utilities (gas, electric, telephone, cable TV) and
retaining walls if needed. This model assiiines a 522,000 land development cost.
Processing/permit fees would include typical fees paid to develop multi-family units in Carlsbad.
Such fees would include the following:
0
0
0 Special assessment fees (Mello Roos, public facilities, traffic impact, bridge &
Plan check fees (grading, sewer, water, improvements, landscape, building);
Inspection fees (sewer, water, improvements, landscape, building);
Permit fees (grading, sewer, building);
Processing fees (tentative maps, final maps, EIA, other application fees); and
thoroughfare, school, park in-lieu, drainage area, fire hydrant),
Average processing and permit fees in Carlsbad ainount to $18,000 per dwelling unit.
Facilities Management Fees are costs associated with financing the public facilities and
infrastructure required within a Facilities Management Zone. Once the facilities zone plan has
been completed and facilities shortfalls have been identified, developers are required to pay the
costs to finance the construction of these needed facilities. This amount can vary anywhere from
$500 to $20,000 per unit depending on the Facilities Management Zone the project is located
within and the facilities that need to be built. A $10,000 per dwelling unit cost is used for the
Facilities Management Fees.
The recreation and amenities cost is derived from the requirements of the Planned Development
(PD) ordinance. This includes costs for passive (open space) and active recreation amenities
(Le. swimming pools, spas). Individual developer costs for recreation and amenities will vary.
This model allocates $4,000 per dwelling unit in recreation and amenities.
Land carry is the financing cost to carry land froin when a loan is obtained from a lender for
the purchase of property until development actually starts. For a for-sale project, this loan was
assumed to be 3 years at 10% interest rate, compounded annually. For a rental project, this loan
was assumed to be 18 months at 10% interest rate, compounded annually.
Onsite costs are divided into two categories: direct and indirect costs. Direct onsite costs are
the hard costs to actually construct the buildings. To construct a two-story conventional wood
frame multi-family project at 20 du’s/acre with no elevator service or subterranean parking, the
1991 hard costs are assumed at $42 per square foot. This includes the lumber, bricks, framing,
foundation, stucco, drywall, electrical, heating, plumbing, and roofing.
10
e e ,-?I ).I ,
The 1991 hard cost of construction (S42isq ft) does not include the costs of fulfilling the
Housing and Community Development (HCD) Emergency Regulations with regard to Tit
of the Amencans with Disabilities Act (ADA) and the Fair Housing Amendment Act. A f
story and higher density project would call for steel and concrete construction and elev
service. The hard costs per square foot would be mtlch higher in both instances,
Onsite indirect costs are calculated at $3.50 per square foot. Onsite indirect costs include
miscellaneous equipment rentals throughout project construction, labor salary, superinten1
salary, warranties, architects, and structiiral engineers. The indirect costs basically cover:
costs of personnel, office and administration costs to run a project from a field office.
Overhead is the personnel, office and administrative costs which are not field associated.
calculated at 4 percent of the selling price or projected selling price of the unit. This percenl
is the standard percentage iised in the industry.
There are selling costs to attract future home buyers and marketing costs to attract future ren
to a residential project. These costs would include the cost of a selling commission, re
company, in-house staff, neb spaper aclvertisements, signs, flags, models and associated c
or brochures needed to market the product.
It is assumed that marketing costs for a rental project could range from 1 to 2 percent of the
to build the project.
A conservative estimate of 5 percent of the selling price of the unit is used to calculate
selling costs. This percentage is retlective of a good and active market, where very 1
advertising and no incentives would be utilized. Today with a tough market, the selling c
could range anywhere from IO to 15 percent. Sellers now use incentives, such as crE
financing and buy downs to help sell their products.
The last development cost is financing the actual construction of the dwelling unit. Financ
costs of for-sale and rental projects are assuiiied at 6 months at 10 percent. An additic
financing cost for rental projects includes permanent loan origination fees of 2 percent of
loan.
construction trailer placed onsite with its associated utility and telephone costs, portable toi
Homeowner A ffordabili ty Gap
Based on the assumptions made, Table 5 below siiininarizes the estimated Carlsbad construc
the estimated development cost is approximately $142,900. For a three bedroom/two 1
condominium of 1,100 square feet, the estimated development cost is approximately $156,(
No profit is included. The estimated construction costs are cost-to-produce the units only.
costs for a for-sale dwelling unit. For a two bedrooinlone bath condominium of 850 square f
11
. I a, 0 0
Table 5
Land dervlopiucnr cosr.~
Fucilir ies Mol I (/get iict I r Fccs *
Directs (hard costs) @ $42/sq ft
NOTES;
ITALIC Italic face type indicates cost factors that could range widely in Carlsbad
depending tipon the location of the property (i.e. Local Facilities
Management Zones) and other factors.
Varies by zone ($500 - $20,000 per dwelling unit) *
12
0 I-’, ,’ 1 L
Table 6 shows the maximum monthly affordable housing payments that different income le
could afford to pay to service a mortgage for a two bedroom/one bath or three bedroom/
subtracting the costs associated with hotneowner association fees, utilities, and property tax f
the total monthly affordable housing payment.
Under current development standards, policies and regulations, this project would necessita
planned development. Planned developtnents include commonly owned property and prii
streets which would require that a homeowners’ association be established. Typ
homeowners’ association fees are assumed to be S 100 per month. The fee covers such exper
as administration, property (hazard) insurance, landscaping, and maintenance and opera
costs.
A reasonable utility allowance is assumed to be $50 per month for a two bedroom/one bath
$60 per month for a three bedroomitwo bath unit. This is a typical allowance as derived f.
the City of Carlsbad Housing and Redevelopment Department - Utility Allowance.
This report further presumes a property tax rate of 1.2 ’76 of the selling price of the unit, V
bath dwelling unit. This maxinium iiioii thly affordable housing payment is obmned a
a down payment, property mortgage insurance is not required and is not included for this rep(
TABLE 6
Income Level
A low-income family of three, residing in housing that has received either housing product
assistance or rental assistance froin the government, would be able to contribute $651 to co
total monthly housing expenses (see Table 3). The maximum affordable mortgage payment
this family would be $441 per rnonth(see Table 6). A low income family of four, residing
an assisted unit, would be able to contribute $723 to cover total monthly housing expenses. c
maximum affordable mortgage payment for this family would be $498 per month.
13
Unit Income Maxiinurn Monthly
Size Level Affordable
(a) Mortgage Payments
Low $44 1
(b)
2 BR/ Income
1 BA 9280 Very
LOW
Income
LOW $498
Very
3 BR/ Income
2BA ' $316
Low
Income
Maxiinurn Down Development Capital
Mortgage payment Cost (e) Subsidy
Payment (c) (d) Required
(0
S50,252 $5,584 $142,900 $87,064
$3 1,906 $3,545 $142,900 $107,449
$56,748 $6,305 $156,600 $93,547
$36,008 $4,001 $156,600 $116,591
e 0 %?' n .' I
As shown in Table 7, the $441 a month available to a family of three for affordable hou:
payments would service a mortgage of $50,252. With costs of developing a two bedroom
at $142,900, there is a $87,064 gap between the costs of developing the unit and the main
mortgage which can be supported by a low income family of three.
A Iow income family of four would have avdable $498 to service a mortgage of $56,748.
gap between the costs to develop a three bedroom unit and the maximum mortgage payment
a 10 percent down payment is approximately $93,547 (see Table 7).
15
(ASSUhLIES NO
Unit Size
Square Footage/ Uni t
Land cost Q $ 400,000/Act.e
@ 20 Dn’s/Acr*e
Ofsites:
e Precie veiopillel I1
e Land developntrnr co.crs
e Processinylperiiirr f2cs
0 Fnciliries I iiiit tog en let ir foes x
Recreation & Ariiei7iries
SUBTOTAL - Cost jbr Improseti Land
Land Carry - 18 Months
Onsites:
e Directs (hard costs) @ $42/sq ft
0 Indirects @ $3.50/sq it
Overhead @ 4% of Sales Price
Marketing 1 - 2% of Cost to Build
Finance (Construction and Permanent)
TOTAL COSTS
PROFIT)
2 Br/1 Ba 3 Br/2 Ba
850 1,100
$20, OOO $20, ooo
$5, 000 $5,500
$22,000 $22, 000
$18,000 $1 8, 000
$1 0, ooo $10,000
$ 4,000 $4,000
$79, OOO $79,500
$3,000 $3,000
$35,700 $46,200
$3,000 $4,000
$5 ,Ooo $5,500
$2 ,Ooo $2,200
$6,500 $7,100
$134,200 $147,500
Monthly Affordable Housing Rents (Assisted)
Unit size 2 BRi1 BA 3 BR/2 BA
Income Level Low Very Low Low Very Lo
Total monthly affordable housing payinents $5.57 $465 $620 $5
Utilities $50 $50 $60 $t
Maximum Monthly Affordable Housing Rents $507 $4 15 $560 $41
J
Unit
Size
2BW
1 BA
3 BW
2 BA
Income Maxi mum Mor1 t hl y Tenant Development Capital
Level Affordable Housing Supported Debt Costs (d) Subsidy
Low $507 $30,845 $134,200 $103,355
Income
Very Low $4 1s $25,248 $1 34 , 200 $108,952
Income
Low $5 60 $34,069 $147,500 $1 13,431
Income
Very Low $456 $27,742 $147,500 $1 19,758
Income
(a) Rents (b) (c> . Required (e)
e e t-* 1 I* * I
ComDaring For-Sale and Rental Unit Affordabilitv GaDs
Table il compares the capital subsidy that would be required for a for sale unit versus a re
unit by unit size and income levels. The capital subsidy required to make a unit affordabll
a lower-income household is significant, whether or not public assistance is given for hou:
production or occupancy of the unit.
TABLE 11
TENANT SUBSIDY REQUIREMENTS AT INCOME LEVELS AND UNITS
SIZES FOR CARLSBAD
NOTES :
Development costs and standards for affordability assumptions are identical to tt
appearing in Tables 7 and 10.
The capital subsidy required to make the unit affordable to lower-income households will PI
less costly in homeownership tenure than renter tenure. The capital subsidy required for a
sale unit is less because of the 10 percent down payment made by the lower-income house1
and the similar development costs of for-sale and rental dwelling units.
In practice, many lower-income lioiisetiolds will find it very difficult to provide the dc
payment and loan costs. If a lower-income tiouseliold is unable to provide the down payn
and loan costs, other funding sources must be accessed to subsidize these costs. There
government programs such as Matching Down Payment Program (CHFA) and prb
foundations that can assist lower-income households with a down payment and loan costs.
If the down payment and loan costs have to be subsidized, the true capital subsidy requira
make a home affordable to a lower-income household will increase. For a low-incc
household, the capital subsidy required would still be less for homeownership tenure than re
tenure (see Table 12).
19
Unit Income
Size Level
2 BR/ Low
1 BA
3 BR/ Low
2 BA
Very Low
Very Low
Capital Subsidy Required
For-Sale Units (a) Rental Units
$92,648 $103,355
S 1 10,994 $108,952
$99,852 $113,431
$120,592 $1 19,758
d) * .-I1 ,,, ,
Filliiic the Affordability Gap
This analysis suggests that there exists a significant affordability gap between what a lo
income household could afford to pay for rent or mortgage and the costs of constructing
operating a typical apartment or o~cned home in Carlsbad. This affordability gap will ei
have to be borne entirely by tlie de\.eiopment coinmiinity (with the actual cost increases li
being passed on to the homebiiyers of assoclated market-rate dwelling units) or assistance r
be provided from outside sources (including the City) to help reduce this affordability gap
The $87,064 subsidy (recall Table 7) required to make a two bedroom for-sale unit afford;
to a low-income family of three will be used to understand how the affordability gap coulc made up.
The City’s Inclusionary Housing Program requires a minimum of 15 percent of all fu
residential units developed in any master plan, specific plan or qualified subdivision shal
reserved for and affordable to lo\cer-iiicoriiz householcls. With a 15 percent requirement
ratio of dwelling units for lower-income households to market-rate dwelling units is 1 to 2
(100 du’s/l5 = 6.67 du’s; one of LiIiicli is lower income). Therefore, for every 5.67 ma
rate dwelling units constriicted, one dwelling unit for a lower-income household would
required.
Without outside assistance, the $87,064 affordability gap would have to be totally subsidize(
the market-rate dwelling units within a project. The additional cost per market rate dwelling 1
would be $15,355 ($87,064/5.67 = $15,355).
In order for 15 percent of iiiaster plan units to be low-income affordable, all of the market-
units would increase in price approximately $15,355. This would be an extremely he
subsidy .
Members of the Ad Hoc Committee froin the private sector have expressed great concern at
being required to bear this burden without some form of additional public agency or o
outside assistance (City assistance is already assumed in the form of density transfers or boni
needed to yield the 20 du/acre assumed in the Table 5 and 8 proformas).
WHAT THE CITY COULD DO
The Ad Hoc Committee explored some of the possible incentives and subsidies which the (
might be able to provide towards reducing tlie affordability gap. This exploration - conduc
in the form of an open-ended, all-things-might-be-possible brain-storming session -is summari
in Appendix A. These incentives and subsidies are presented as ideas only and should no
considered formal reconimendations of this report. Ideas fall into the following genl
categories.
21
I t .. 0 e
The City could:
0
0 Reduce permit/processing fees;
0 Reduce facilities fees;
0 Timing of fees;
0 Fast tracking ;
0 Streamlining processing system ;
0 Buy down of interest rates; and
0 Subsidy of down payment and other closing costs.
Table 13 helps illustrate the impact to the affordability gap associated with the development costs
for a two bedroom, for-sale dwelling units if the City were to maximize its efforts by totally
eliminating land costs, facilities fees and permit/processing fees. There would be an estimated
maximum cost savings of $48,000.
Buy down or reduce land costs (allowing Iiigher densities, flexible design standards);
TABLE 13
NOTES: '
(a) From Table 5 (Estimated Carisbad construction Costs - For Sale)
The Land costs per dwelling unit ($20,000) could be eliminated by allowing density increases
to cover the 1596 inclusionary requirement per acre of land. In other words, the number of
lower income dwelling units required would be offered as a density bonus. Assuming that the
property is built out at the maximum peniiissible density (the Growth Control Point), and the
inclusionary units are permitted through additional density bonuses, then the land costs for these
additional inclusionary units would be effectively eliminated.
If the City were to eliminate processing/permit fees and facilities management fees (under the
assumption that adequate facility capacity exists), then an additional $28,000 could be saved per
dwelling unit.
22
Unit Income Maxiiiiuiii blonthly Maximum Down
Size Level .4 ffo rda b le hlortgage payment
(a) Mortgage Paynients Payment (4
LOW s44 1 550,252 $5,584
(b) (c)
2 BR/ Income
1 BA Very Low 3280 $3 1,906 $3,545
Income
LOW 9498 556,748 56,305
3 BR/ Income
2 BA Very Low
Income
93 16 $36,008 S4,OOl
Development Capita
cost Subsid
Require (e)
$94,900 $39,C
$94,900 $59,4
$108,600 $4.53
(0
$108,600 $68,5
* . 4, 0 rn
WHAT THE BUILDER COULD DO
The pro formas used in this aiialysis already have deleted builder profit. Therefore, the builder
cannot further reduce the gap by reducing profits. Areas where builders may affect the gap fall
into two categories:
0 Provide additional direct subsidies
- From the market-rate units in the same project (discussed previously);
Froin other market rate units in other projects. -
0 Reduce production costs
- Reduce land costs still further by building at still higher densities (The
City's Housing Element calls for considering densities up to 29 units per
acre, with i ii cf i v i d iial site review) ;
Reduce tloor areas, while retaining the saine number of bedrooms;
Reduce anlenities in project coininon areas or in individual units (some are
required by City regulations);
income housing tax credits, the aggressive pursuit of C.R.A. loans, and
partnersti i ps wit 11 iion-profi t housing organizations.
- Make use of iiiore creative fiiiancing techniques, such as federal low-
- Redrice selling costs; and
- Consider alternative building types of lower unit cost (requiring close
cooperation with the City 'on policy and standards).
The Ad Hoc Committee did not attempt to quantify the dollar cost savings which might result
from these tactics. Each would have to be explored carefully, and, as noted, several depend
heavily upon cooperation with the City to bring tliein about.
WHAT NON-PROFIT HOUSING ORGANIZATIONS COULD DO
There are both municipal non-profit housing organizations and private non-profit housing
organizations, which are of great value because of their access to sources of financing not
otherwise available to the private, for-profit builder. Many of these opportunities depend upon
state or federal grants and loans, or special taxation regulations. Non-profit organizations also
have more-ready access to certain private financial soiirces, for which for-profit builders may
also apply, but for which qualification is iiiore difficult.
If non-profit housing organizations could obtain a below market interest rate of 8 percent the
capital subsidy required to make a dwelling unit affordable to a lower-income household would
be reduced (see Table 15). The capital subsidy required would be reduced because with a below
market interest rate of 8 percent, the maxiiniiii1 mortgage payment and 10 percent downpayment
a lower-income household could afford to pay would be higher.
24
Unit
Size
2 BR/
1 BA
3BW 2 BA
Capital Subsidy Required
Income Level Market I n teres t Below Market cost
Rite - 10% (a) Interest Rate - 8% Savings
Low $87,064 $76,121 $10,943
Very Low 5 107,449 $100,501 $4,948
Low s93,547 $8 1,190 $12,357
Very Low SI 16,591 3 108,749 $7,842
2 .a* 0 W
Concl 1ISIOI-l
The primary purpose of this document is to report the results of an analysis of the affordability
gap existing between what lower-income households are able to pay for housing and the costs
associated with actually producing inarket-rate housing in the City of Carlsbad.
Under the economic model and its assiimptions cieveloped by the Ad Hoc Committee (excluding
consideration of any builder protit), gaps range from over $75,000 to nearly $120,000 per unit
for typical two and three bedroom apartments and condominiums. The gap is typically three to
five times greater than the total amount of inoney which low and very low-income families can
provide for shelter at an affordable level.
The logical key follow-up concern is how to close this immense affordability gap. The report
briefly explores some of the things which the City, for-profit builders, and non-profit housing
organizations might do. This is an ~nformational report only. Therefore, no specific
recommendations are made regarding this exploration.
innovative approaches will be required, involving partnerships between all three parties.
The recent history of Carlsbad is that the private sector has provided little housing which is
affordable to low and very low-incoine families. However, the need is known to be great. If
the affordability gap is to be overcoine, the challenge is for all members of the community to
pursue solutions creatively, cooperati vel y , and aggressively.
However, it is likely that committed,
26
0 0 -'I m*. .
Attached are three appendices as follows:
APPENDIX A
APPENDIX B
APPENDIX C
APPENDIX D
Economic Incentives to Reduce tlie Affordability Gap
Methodology for Determining Maximum Mortgage Payments and Tc
Supported Debt
Worksheets to Determine Capital Subsidies
Inclusionary Housing Proforma Outline
27
e e A I-.
APPENDIX A
Economic Incentives to Reduce the Affordability Gap
28
z-'I ,*a 1 0 0
AFFORDABLE HOUSING DEVELOPMENT ISSUES
WEDNESDAY. SEPTEMBER 25, 1991
CONCEPTS SUBCO~IMITTEE MEETING
SUhIXIARY OF DISCUSSION
ISSUECQ SUGGESTED CHANGE61
I. DENSITY
0 Maximum perinitteci density (19 The maximum permitted density should
increased on specific sites to enable
development of affordable housing. Critc
for selecting higher density afford:
housing sites should be based upon:
1. Land use compatibility
2. Location of site in proximity
shopping, public transportation, m;
roadways, or employment opportunities
3. Product type (Le., condo, apt., Si1
Room Occiipancy Unit, Senior, etc.)
A Managed Living Unit Ordinance shc
DU/AC) restricts the clevelopment of
affordable housing
0 There exists no ordinance for the
development of Managed Living be adopted.
Units.
0 Affordable Housing units must The City may consider exemp
comply with current City densities, affordable housing units from de
considerations.
0 Parking requirement for both "for City could consider flexible pa
sale" and rental projects limits the standards ( ie; design/layout of par1
achievement of densities necessary reduced parking standards; r
for creating affordable units. considerations for underground pa
structures; more considerations
location/proximity to public transport
29
e 0 I I .,
facilities) for affordable projects.
0 Landscaping, setbacks 2nd open City could consider flexible landscape space require nien ts c LI rre ti t 1 y 1 i 111 i t standards t'or affordable projects.
density
0 Street widths limit density City could consider reducing street/driveway
standards to enable the achievement of
densities necessary for the development of
affordable housing.
Allow flexible building height standards for 0 Building height Iiniitations restricts
density. affordable housing .
0 Site planning standards (i.e., distance City could consider less restrictive
between buildings, setbacks froni development standards for affordable
slopes, driveways, c i rc ti la tion housing.
comdors) are too restrictive.
II. PROCESSING & PLAN CIIECK
0 Processing of projects is too cornplex
and takes too long.
Develop a priority system for processing all
affordable housing projects, For example,
develop a "point system" for priority
processing.
Simplify process to "zero
processing " /ad m i n istrative only. Perhaps
develop a "one stop" processing program.
For example, allow builders to obtain
building permit at the countedno delay.
Continue to use outside source for plan
check; this speed up the process
considerably.
Add staff resources (either consultant or city
personnel) to review affordable housing
projects.
City may consider specialized staff to review
30
I U e 0 ,-'I .'. .
affordable housing projects; specific st;
assigned to only process affordable housi
projects.
Ediicate all staff persons on the need I
affordable housing and implement a poli
to expedite processing of affordable housi
projects.
Iinplement a 'I team" approach to processi
projects; assign a "strike team" to w(
tosether on each affordable housing proje
Develop a comprehensive affordable hous
application (including specific wril sii iclel i nes/requi remen ts) for developers
use in proposing an affordable how
project.
Develop an affordable housing 1
application process to
provide early direction and guidance
developers regarding specific afford;
housing proposals. Assigned staff shoulc
included in pre-application meetings 7
(level o per s .
Prepare a list of contact persons
information on City procedures/standa
concerning affordable housing.
Consider reducing the amount
information required upfront to obtain
approval of project.
Eariy in process, assign a project mar
to each affordable housing project to
work it through the "system."
Consider establishing a fast-track pri
whereby affordable housing project5
90 days).
processed within "X" number of days
31
e e . .*
As soon as project application is deemed
complete, forward directly to Planning
Conimission or Design Review Board
without staff negotiated revisions. Staff
reconiinendation would be based upon
origiiial merits of project.
Develop a 2-step project review process for
affordable housing proposals:
1. Obtain preliminary project approval from
Planning Commission or Design Review
Board with preliminary drawings..
2. Applicant would complete detailed
drawings following approval and staff will
siinply plancheck for conformance with
preliminary approval.
City should consider the creation of a forum
to discuss and resolve the issuesldetails of a
project while it is in a concept stage.
Disposition and Development Require a schedule of performance as part
of the agreement with obligations for both
City and Developer included.
Agreement
CEQA compliance As permitted under Sections 15162 and
15 182 of the California Environmental
Quality Act, no additional EIR or Negative
Declaration need be prepared for a
residential project located within a Specific
Plan for which an EIR was previously
prepared. As permitted and where
appropriate, the City should allow an
environmental impact report for a specific
plan to suffice for a subsequent residential
project within that specific plan rather than
completing a second review when actual
residential project is submitted.
32
..’I ..I b 0 I)
III. PROCESSING FEES
0 Fees are too high - significantly Work with deposit, and charge develoc increase cost of housing acriial costs for processing pro;
plansiapproval. Work on “drawdoc
process. Contact other cities
information on their depo
procedures/structure.
Allow for full cost recovery on all proji
except affordable housing proje
Affordable housing project fees would
subsidized through other types of proje
consider increase of fees to “non-affordal
hoiisi ng projects.
Process fee subsidies for affordable hou
projects.
Work with other fee producing agen
(i.e., water districts, school districts, el
to reduce fees for affordable hou
projects .
Eliminate, reduce or subsidize all fees
affordable housing projects.
Concern: will incentives (no or red
fees) encourage too many 100% afforc
housing projects? If so, what are the im]
of this?
Develop target times for processing proj
Reduce total number of permits and
required; develop a flat rate fee
affordable housing projects.
33
.. 8‘
IV. FACILITY FEES
0 Facility fees are too high - provide Re-evaluate method for calculating
problem for building affordable additional need for facilities and related
housing facility fees.
[Type: Streets, Water, Sewer, City to eliminate or subsidize fees. Schools, Library, Parks, Public
Finance, Etc.}] City to give fee credit for affordable housing
projects.
Re-evaluate fees on regular basis.
Review standards for how to calculate an
“Equivalent Dwelling Unit” (EDU). A
hlanaged Living Unit would not have same
clemand for water, sewer, etc. Therefore,
the fee per EDU should not be the same as
an apartment.
Review standards for water and/or energy
setting fees.
conservation and unit size and consider in
V. TIMINGOFFEES
Water meter fees are presently Allow water meter fees to be paid at time of required at time permit is approved
All fees to be paid upfront
iiistal lation.
Perinit a split in fee payment schedule
according to two step process noted below
in this summary.
Allow affordable housing projects to pay all
fees at time of building permit application
(if fees are not paid, building permit will not
be issued).
Andther idea - a two-step fee schedule as
fo 1 I ow s :
1. Processing fees paid at building permit
application.
3 4.
,-'t .'l a 0 0
2. Building permit fees paid when propt
is sold. City would have lien on prope Fees Kould be collected at close of escrc
Attempt to convince school district to i
operate on split fee schedule.
Comment: Facility fees are not re
required until people are living withi
unit.
VI. OTHER INCENTIVES OR GESERAL COhfMENTS:
1) CITY ASSISTANCE WITH FINANCING:
a. Mortgage Revenue Bonds
b.
c.
d.
Lobbying for stateifederal funding for affordable housing projects
Application for Proposition 84 funds
Application for State/Federal H.0.M.E (Home Ownership Made Easy) fu
The HOME prograiii is desigiied to provide below-market cost single fa]
housing to low and moderate income persons and families at affordable rents
with an option to purchase the homes when either accumulated saving:
appreciated market valiie of the homes are sufficient to provide down paymt
Assist with private soiirce funding opportunities
Provide financial gclatali tees to assist developers in obtaining other financin
Assist with applications for Housing and Urban Development (HUD) 202
project financing
Enforce Community Reinvestment Act (CRA) compliance by local len
institutions; put pressure on the institutions to meet their CRA requirement.
e.
f.
g.
h.
2. CITY ASSISTANCE WITH LAND ACQUISITION:
a.
b.
c.
CREATE FINANCIAL POOL OF EQUITY FOR PROJECTS; "EQUITY SHARl
Make City owned property available for affordable housing projects
Assist in acquisition through condemnation proceedings
Assist with education process on tax credit benefits
3,
35
A r ', W 0
ARRANGEMENTS
PARTICIPATE IN AGENCY "TRADING" OF LAND
CREATE A HOUSING TRUST FUND TO ASSIST WITH AFFORDABLE HOUSING
PROJECTS
CITY ASSISTANCE WITH ACQUISITIQN OF EXISTING RESIDENTIAL UNITS
4.
5.
6.
7. ELIMINATE RESTRICTIOKS TO BUILDING "GRANNY FLATS" (A GRANNY
FLAT IS A SECOND RESIDENTIAL UNIT BUILT ON A PIECE OF PROPERTY
DOES NOT HAVE A FULL KITCHEN AND IS USUALLY BUILT TO
ACCOMMODATE A FAMILY MEMBER.)
PROVIDE SECTION 8 WAITING LIST TO DEVELOPERS SO THEY KNOW WHO
AND HOW MANY PEOPLE ARE LOOKING FOR ASSISTANCE
DEVELOP A RESALE PROPERTY TRANSFER TAX OR FEE FOR SUBSEQUENT
RESALE OF 1992 OR LATER HOhlES TO BE USED TO FINANCE AFFORDABLE
HOUSING
CITY TO PROVIDE "GAP" LOANS TO BUILDERS AND/OR HOME BUYERS
WHICH CURRENTLY HAS AN EXISTING SINGLE-FAMILY HOME. THE UNIT
8.
9.
10.
11. DEVELOP A DEED HESTRICTION PROGRAM WHICH WOULD REQUIRE
DEVELOPERS TO RETURN A PERCENTAGE OF THEIR RETURN ON MARKET
RATE HOUSING UNITS AS A FEE TO PRODUCE AFFORDABLE UNITS
12. CITY TO PROVIDE LOAN GUARANTEES OR BUY DOWN porm ON HOME
BUYER LOANS
13. EXPAND REDEVELOPMENT PROJECT AREA BOUNDARIES. ADDITIONAL
AREA WILL PROVIDE ADDITIONAL TAX INCREMENT & TAX SET-ASIDE
FUNDS FOR AFFORDABLE HOUSING
14. CREATE PACKAGE OF ORDINANCES FOR APPROVAL BY THE CITY
COUNCIL; STAFF SHOULD RECOMMEND TO THE CITY COUNCIL A SET OF
PRIORITIES FOR IMPLEMENTING PROGRAMS/ACTIVITIES REQUIRED TO
CREATE AFFORDABLE HOUSING IN CARLSBAD. STAFF SHOULD PROVIDE
AN OUTLINE OF ORDINANCES REQUIRED TO IMPLEMENT THE HOUSING
ELEMENT PROGRAMS. ASK THE CITY COUNCIL TO SET PRIORITIES BASED
ON STAFF RECOMMENDATIONS.
36
,"' I . - 1 . 0 0
APPENDIX B
Methodology for Determining Maximum Mortgage Paymen
and Tenant Supported Debt
37
. 1 *. 0 0
Determining - Maximum hfortgane Pay meti ts
Table "A" illustrates the process to detsriiiirie the iiiaxiiiiu til mortgage payment for lower-income
households to purchase a two bedrooin/one bath or three bedroomitwo bath condominium. The
following financing assumptions have been made:
0
0 30 year loan term.
90 percent financing (10 percent down payineiit):
10 percent interest rate; and
TABLE A
NOTES:
(a)
The following are calculations used for Table A:
0 Maximum loan =
Taken from Table 6 (Monthly Affordable Housing Payments - Assisted)
1 -( 1 +m7) -n PMT* INT
PMT = Monthly income ovuilohle fbr ddJt soiwe
INT = Monrhly inrerest rim
n = Tern of loan (months);
0 Down payment = Total unit cost - maximum loan; and
0 Total unit cost = Maxiniiiiii loanlfinaiicing rate (90%).
38
TENANT SUPPORTED DEBT/RENTAL INCOME
Unit Size 2 BR/1 BA 3 BW2 BA
Income Level Low Very Low Low Very L
Number of Units 3-0 20 20
Maximum Monthly Housing Raits Per Unit $507 $4 15 $560
(a)
Monthly Vacancy Cost Per U 11 1 t $35 $29 $39
Monthly Operating Cost Per Uiiit 5 152 $125 $168
Net Monthly Operating Income Per Unit $320 $26 1 $353 I
0
<
Monthly Income Available for Debt Service $27 1 $22 1 $299
Per Unit
Monthly Income Available for Debt Service $5,420 $4,420 $5,980 $L
For Project
Maximum Loan For Project $616,899 $504,957 $681,387 $55
Maximum Loan Per Unit $30,845 $25,248 $34,069 $2'
. 1.. e
Calculations are first done on a per unit basis. The followiiig are the formulas used in Table
2 on a per unit basis:
0 Monthly vacancy cost per iitii t
= Maximum monthly housing rents per iiriit X Vacancy rate (.07);
0 Monthly operating cost per unit
= Maximum housing rents per unit X Operating rate (.30);
6 Net monthly operating income per unit
= Maximum monthly housing rents per unit - (Monthly vacancy cost per unit + Monthly
operating cost per unit); and
Monthly income available for debt service per unit = Net monthly operating income per
unitltotal deb1 service (1.18).
Then, it is determined what the maximum loan would be for the project. Thus, calculation are
done on a per project basis. The followi1ig are these calculations used in Table 2:
0 Monthly income available for debt service per project = Monthly income available for
debt service per unit X Number of units (20); and
0 Maximum loan per project =
1 -( 1 +” -n PMT+ INT
PMT
INT = Monriily inrcsesr siirij
n
= Monthly income o\uifohle fhr doht siJn*ice
= Term of iocrn hiotirlis)
The maximum loan per project intist now be converted back to a per unit basis.
0 Maximum loan per iinit = Maximtiin loan per project/Number of units (20).
40
*.l I .,* , I 0 0
APPENDIX C
Worksheets to Determine Capital Subsidy
41
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APPENDIX D
Inclusionary Housine v Proforma Outline
50
I 0 0 '.I *,.I ,
14. Landscape planclieck
15. Landscape inspectlon
16. Building permit
17. Building plancheck
18. Building inspectloll
19. Strong motion
20. Street light energize
21. Facilities management fee
22. Mello Roos
23. Public facilities fee
25. Bridge & thorouglitare
26. School fees
27. Park in-lieu fees
28. Drainage area fees
29. Fire hydrant fees
Selling costs @ - 470 of sales price
Marketing costs 8 - % of cost to build
1.
2.
24. Traffic impact fee
H. Overhead costs Q % of sales price
I.
J.
K. Finance costs For sale - constructiot~ financing
Rental - construction and perinanent financing
52
a I.
Tncl uslonary Housing Pro foriii a
I. PROJECT DESC R I PTION
A. Number of dLkelliiig units
B. Proposed density
C. Product type(s)
D. Unit size
1. Square footage
2. Nu til ber of bed roo iii s
3. Nuiiiber of bathrooliis
Parlung fac 11 1 ties E.
F. Open space/Recreationai amenities
G. For sale/Rental
11. PROJECT COSTSlDWELLING UNiT
A. Land cost
B. Land developiiient costs
1. Grading
2. Facilities
1. For sale
2. Rental
C. Land carry
D. Onsi teslconstruction Costs
1. Directs (hard costs) @ 5 /sq ft
2. Indirects @ 5 lsq ft
3. Recreation Rr aiiienities
E. Application processiiig costs
1. City application fees
F. Predevelopment costs
1.
G. City fee
1. Grading permit
2. Grading plancheck 3. Sewer permit
4. Sewer benetit area
5. Sewer plancheck 6. Sewer inspection
7. Sewer lateral charges a. Water meter
9. Water service connection
10. Water plancheck
11. Water inspection
12. Improvements plancheck
Consultants (Etivironiiiental consultants, Architects, Planners, Engineers)
13, Trnproveiiients inspeclion
51
I4 -8 0 e EXHIBI
June 1, 1993
TO:
FROM: Leilani Hines, HRD
RE:
I have attached the revisions to the affordability gap for both owner-occupied and rental un
The following changes have been made for 1993:
Factors/ Assumptions 1991 1993
Interest Rate 10% 7.5%
Planning & HRD Housing Team
AFFORDABILITY GAP REVISIONS FOR 1993
Median Annual Income
Household Size
$41,300 for family of four
2 Bdrm - 3 persons
3 Bdrm - 4 persons
$43,900 for family of four
2 Bdrm - 4 persons
3 Bdrm - 6 persons
(Maximum number of persons pc
bedroom)
Utility Allowance $50 Based OR Section 8 Utility
All0 w ance
Mortgage Insurance No allowance made .5 % of Purchase Price
Downpayment 10% 5%
0 0
Maximum Affordable Loan
NOTES
** Utility Allowance based on average of Section 8 utility allowance for row/townhouse (01/93).
Assumes an electric utility allowance for heating, cooking, and basic. Homeowner's Association pays for
hot water, water,and trash.
k
I CAPITAL SUBSIDY REQUIRED I $95,242) $86,6431 $70,140) $102,6781 $
NOTES
** Utility Allowance based on average of Section 8 utility allowances for apartments (01/93}
Revised: 01 - Jun-93
4- r' , ' I e 0
NOTICE OF PUBLIC HEARING
INCLUSIONARY HOUSING IN-LIEU FEE
NOTICE IS HEREBY GIVEN that the City Council of the City of Carlsbad will hc a public hearing at the City Council Chambers, 1200 Carlsbad Village Drib Carlsbad, California, at 6:OO P.M., on Tuesday, September 21, 1993, to consic
the adoption of an Inclusionary Housing In-Lieu Fee, and Formula for calculat. the In-Lieu Fee.
If you have any questions regarding this matter, please call Chris DeCerbo, ,the Planning Department, at 438-1161, extension 4445.
If you challenge the adoption and/or calculation of the Inclusionary Housing ? Lieu Fee in court, you may be limited to raising only those issues raised by J or someone else at the public hearing described in this notice or in writ' correspondence delivered to the City of Carlsbad City Clerk's Office at, or pr to, the public hearing.
APPLICANT: City of Carl sbad PUBLISH: September 9, 1993 CARLSBAD CITY COUNCIL
.
s 8 0 ' NOTICE OF PUBLIC HEARING *-e .. .
NOTICE IS HEREBY GIVEN that the City Council of the City of Carlsbad will hold a pu
hearing at the Council Chambers, 1200 Carlsbad Village Drive, Carlsbad, California, at 6
PM., on Tuesday, , 1993, to consider the adoption of an Inclusion
Housing In-Lieu Fee, and Formula for calculating the In-Lieu Fee.
Those persons wishing to speak on this proposal are cordially invited to attend the pu
hearing. Copies of the agenda bill will be available on and after
If you have any questions, please call Chris DeCerbo in the Planning Department at 4
1161, ext. 4445.
If you challenge the adoption of these In-Lieu Fees in court, you may be limited to rai5
only those issues you or someone else raised at the public hearing described in this no
or in written correspondence delivered to the City of Carlsbad at or prior to the pu
hearing.
CASE NAME: INCLUSIONARY MOUSING IN-LIEU FEE, AND FORMULA E
CALCULATING IN-LIEU FEE
PUBLISH:
BLADE CITIZEN:
CITY OF CARLSBAD
CITY COUNCIL
CARLSBAD SUN:
0 0 Ir ,' . 3 t'.-*
.1
(Form A)
TO: CITY CLERK'S OFFICE
FROM: PLANNING DEPARTMENT
RE: PUBLIC HEARING REQUEST
Attached are the materials necessary for you to notice -
ADOPTION OF INCLUSIONARY HOUSING IN-LIEU FEE, AND FORMULA
for a public hearing before the City Council.
7 - II FFF L*L" I LL,
t
Please notice the item for the council meeting of %
Thank you. +&--
dp'
MARTY ORENYAK 2/19/93 Assistant City Manager Dat
9 .; ;- 5 r 8 L 0 * d .-
< I\ &
LL 1 y?
!t I i 1 i
If you have any questions regarding this matter, pteasa call Chr%s DeCerbls, in the Planning flepafltment, at 438-11 61 i cxtension 4445.
CARLSBAD CITY COUNClL APPLICANT City 00: Carlshzad PWliSLlSH: September 9.1993;
THURSDAY carisbad-city-of-9-9 VarindaVhri
a 0 ?7 >', , I &st' 7 '
?HL..- r-7
SEPTEMBER 17, 1993
TO : CITY MANAGER
FROM : Planning Director
CORRECTIONS TO THE INCLUSIONARY HOUSING IN-LIEU FEE AGENDA BIL:
Staff has identified a numerical error in one of the variab contained within the proposed formula for calculating the dol value of the Inclusionary Housing In-Lieu Fee. Specifical Exhibit r139r of the Agenda Bill has been amended to indicate t the capital subsidy required for a 2BR/lBA condominium unit
$63,516/DU instead of $77,216/DU. The net effect of t
correction is that the recommended dollar value of the In-Lieu would be $11,485/DU instead of $12,OOO/DU.
The In-Lieu Fee Agenda Bill, City Council Resolution,
appropriate exhibits have also been amended to reflect t correction (see attachments). The changes have been highlight
*,*>;a&* VbdLT /f'
-.--
MICHAEL J. HOLZ~LLER Planning Director
arb
Attachments
. , k'.
z 0 F 2
=! 0 z 3 0 0
' ' WY OF CARLSBAD - AG-A BILL
DEF AB #
MTG. FEE, AND FORMULA FOR CALCULATING IN-LIEU FEECIT'
CIT DEPT.
RECOMMENDED ACTION:
-PTION OF INCLUSIONARY HOUSING IN-LIEU
PLN
Hold a public hearing and ADOPT Resolution No. I S' the Inclusianary Hausing In-Lieu Fee, and faymula for calcu the In-Lieu Fee.
ITEM EXPLANATION
The Inclusionary Ordinance (ZCA 91-06) mandates that a mini.
15% of all future residential units developed within the City
be reserved and affordable to lower-income households. Th inclusionary requirement shall apply to all new projects pro market-rate residential dwelling units.
Section 21.85.050 of the Inclusionary Ordinance specifie5 certain classes of residential projects may satisfy lower-
inclusionary requirements through the payment to the City of lieu fee or other in-lieu contribution. Basically, the cl
projects allowed to pay the in-lieu fee rather than constr lower-income units are projects with six or fewer dwelling All residential developers subject to in-lieu fees do howeve
the option of constructinq lower-income unit (s) to satisfy
inclusionary requirements.
While it would be preferable for developers to construc required inclusionary dwelling units on the ground as a priority, imposing this requirement on those classes of pr listed above could pose an onerous economic burden. Specifi small developments of 6 units or less may not be econom viable if the inclusionary housing requirement could 01 satisfied by the development of the unit on the ground addition, requiring 1 unit of affordable housing to be const for every 6 or fewer market rate units developed would result inclusionary housing requirement 3f greater than 15%. Simi other existing Inclusionary Housing programs this in-lic option is regarded as equitable and a reasonable alternativ is estimated that less than 10% of future residences dev within the City would be subject to the In-lieu Fee.
An economic study (see Exhibit **4**) was prepared by an
Committee of City staff and for profit and non-profit resid
builders in order to identify the specific dollar value of t
lieu Fee. To summarize, the study quantified the typical cc developing an attached market-rate dwelling unit in Carlsba identified the monetary difference between this cost of devel and the amount that a lower-income household could afford
for housing. The study, as revised for 1993 (see Exhibit concludes that the monetary difference (or subsidy) requi maintain this unit as affordable to a lower-income householc period of 30 years is equal to /unit.
L "'. . t 0 0
PAGE 2 OF AGENDA BILL NO.
The In-Lieu Fee to be paid per market rate dwelling unj
recommended to be equal to 15% of the subsidy required to affordable to a lower-income household, one newly constru typical attached dwelling unit for a 30 year tenure. Fi
percent (15%) of the required subsidy equates to an in-lieu f
The in-lieu fee as proposed, complies with the requiremen.
California Government Code Section 66001 et.seq. The inform
(economic study) upon which the in-lieu fee is based has beer available to the public for review and comment.
The formula for calculating the dollar value of the In-Lieu I; included on Exhibit rr2rr.
Consistent with the formula included on Exhibit rt2rr, Inclusionary Housing In-Lieu Fee would be updated periodical the City Council.
The Inclusionary Housing In-Lieu Fees would be paid to the Cj the time of building permit issuance. All in-lieu fees wou deposited in a Housing Trust Fund and used by the City to pr funding assistance for the provision of affordable housing.
FISCAL IMPACT
There will be costs to the City associated with the administi of the In-Lieu Fees through the Housing Trust Fund. Accordj staff is recommending that a portion of the In-Lieu Fees coll
/market rate unit (see Exhibit rr3rr).
be allocated for City In-Lieu Fee administrative services.
EXHIBITS
1. City Council Resolution No.
2. In-Lieu Fee Formula
3. Inputs to In-Lieu Fee Formula Variables
4. Economics of Developing Affordable Housing, City of Carlsbad 1991
5. Affordability Gap Revisions for 1993
La ' : , v'.
I.
2
3 *
5
6
e 0 !
subsidy required to make affordable to a lower-income housc
for a thirty (30) year tenure, one newly constructed, ti
attached housing unit: and
WHEREAS , the required subsidy is based upon the f ii
of a 1991 economic study, "Economics of Developing Affo:
Housing", prepared by an ad hoc committee composed of City
and private for-profit and non-profit developers: and
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
WHEREAS, the findings of this 1991 economic stud
been updated for 1993; and
WHEREAS, the formula for calculating the dollar va
the in-lieu fee is included on Exhibit If2l1; and
WHEREAS, based upon this formula, and current est
of the variables contained therein, the dollar value of t.
Lieu Fee would be (see Exhibit r1311); and
WHEREAS, consistent with the formula included on E
rt211, the dollar value of the in-lieu fee would be adjustel
time to time by resolution of the City Council; and
WHEREAS, the in-lieu fee would be assessed again
market rate residential units subject to this fee; and
WHEREAS, the in-lieu fee would be required to be F
the City at the time of building permit issuance or prior
recordation of a final map and/or issuance of certifici
compliance for the conversion of existing apartments to air
condominiums; and
1
WHEREAS, the In-lieu Fee(s) paid to the City wo
deposited in a Housing Trust Fund and used for the purp
providing funding assistance for the provision of affo
housing and reasonable costs of administration.
3
e 0 E .* 'I . i , r '*,
INPUTS TO IN-LIEU FEE FORMULA VARIABLES
FORMULA:
X = (A + B + C + Dl E
4
- -
.... . x=
I IMP itU b -- -. .--.
NOTES
** Utility Allowance based on average of Section 8 utility allowance for row/townhouse (01/93).
Assumes an electric utility allowance for heating, cooking, and basic. Homeowner’s Association pays for
hot water, water,and trash.
L, I. I' s
2
3
4
5
6
7
8
9
lo
11
12
13
14
l5
l6
17
l8
19
2o
21
22
23
24
25
26
27
28
a
subsidy required to make affordable to a lower-income housc
for a thirty (30) year tenure, one newly constructed, tj
attached housing unit; and
1'
WHEREAS, the required subsidy is based upon the fii
of a 1991 economic study, llEconomics of Developing Affo:
Housingll,'prepared by an ad hoc committee composed of City
and private \for-profit and non-profit developers; and i
\
WHEREAS, the findings of this 1991 economic stud
been updated far 1993: and
WHEREAS, the formula for calculating the dollar va
the in-lieu fee is included on Exhibit 11211; and
WHEREAS, based upon this formula, and current est
of the variables contained therein, the dollar value of t:
Lieu Fee would be $12,000.00 (see Exhibit Ir31f); and
WHEREAS, consistent with the formula included on E
11211, the dollar value of the in-lieu fee would be adjuste
time to time by resolution of the City Council; and
WHEREAS, the in-lieu fee would be assessed again
market rate residential units subject to this fee; and
WHEREAS, the in-lieu fee would be required to be z
the City at the time of building permit issuance or prior
recordation of a final map and/or issuance of certific
compliance for the conversion of existing apartments to air
condominiums; and \
WHEREAS, the In-lieu Feegs) paid to the City wc
deposited in a Housing Trust Fund and used for the pury:
providing funding assistance for the provision of affc
housing and reasonable costs of administration.
3
0 0 EXH 1. -, I1 8
'\ \
INPUTS TO IN-LIEU FEE FORMULA VARIABLES
\\
FORM- \
7,
X= (A + sk c + D) E
4 "\
\,
\
\\ ($77.216 + $62.977 + $86.843 + $92,943).1%,= $11,999.21
4 '\
\.
"\,,
X = $11,999,21
\
\,
\,<
',
\-.\
? >..
\
>%
\
\
\
',,
Total Unit Cost $51,783 $79,384
Dawnlrayment @ 5% (nut induding points for dosing costs) $2rn $3$69
Maximum Loan $49,694 $75,415
Total Development Cost Per Unit $142,900 $142,900
CAPITAL SUBSIDY FEQUIFQD $104,817 $77,216
&&,on $61,631 $93J
m51 $3,082 $42
$88,376 $58,560 $88,
$142,900 $lsS,soO $156J
$63,573 \$94,969 $62,
, 4 ITl 0 -'a'- -- qt
&."r September 20,1993
f 1v D'U S T R Y
TO! Honorable Mayor Lewis and CouncWernkm
FR:
RE:
John Seymour, Construction Industry Federation
hclusionary Housing Fees - September 21,1993 - Public hearing
On September 2 1, your City Council will consider a proposal to enact another la fees to an alseady over burdensome, costly development process. Generally, the
proposed fees come in two flavors: $2,%5 per home for applicants with approve
and $12,000 per home for applicants with six or less units. Applicants with seve
more units must directly construct the "inclusionary" units per the C&kmnd&
We are gravely concerned about the proposed fees in three specific mas:
A. City's legal authority to impose new COnQitions on appwd map;
B City's lack of legal NEXUS. There is no legal basis upon which to mandate
middle-income home buyers must subsidite lower-income Units;
C. Adding new significant fees on the busiiss community and industry given 1
adverse economic climate; and
D. Adding a new costly, over burdensome process to the City's bureaucracy dir
impacting the business community and industry when the STATE DOES NC
MANDATESUCHAPROGRAM.
RECOMMENDATIONS:
1. Do not adopt the pmposed $12,000 and $2,925 fees:
2. Tentative and final maps already approved should not be conditioned with r
Inclusionary Housing requirements and/or fees;
3. Direct city staff to rem to the Council with a revised hclusionary Housinj
to reflect two key policy decisions:
a. Guarantee that all "gap" costs must be offset by city incentives, wsi
from non-profit groups and other city/statc/federal funding. If the 1
cannot be made, the project should be exempt ftom IncluSioanl
Housing requirements. The middle-income family I wket rute h
buyers should twt have to pay a substdy to cover the gap of the tow
unit. To place this burden on the new middle income is m Wair "
Page 2
September 20.1993
L', ,l, , I 0 0
Page 3
September 20,1993
V4 Inclusionary housing ordinance is contradictory to the City Council's past ac
becoming more user 1 business friendly, enhancing permit srreamlining, and
eliminating onerous rules / regulations on the business community.
The need for affordable housing IS NOT created by residentid developmeni
in those instances whelle existing affordable housing is tom down and rem01
from the housing stock. There is no ''NEXUS'. no relationship on the cond
The City has not completed a NEXUS study.
The findings in the resolution do not meet legal muster. Lines 11 to 16 (pag of the Ordinance adopted in April, 1993 a= contfary to the City Growth Management Program, SANDAG Regional Growth Management Strategy, I
SANDAG analyses and many other documents. This finding tmly smtches imagination and logic.
Whereas, new residential devebpment which does not include nor conm'but
housing for lower income hotrreholdr creates a ned for Crffordable housing
6 reducing the suppty of residential land which &ordable housing could htr
developed; (utd
o increasing population, which creates a demand for typical community sen
(stores, dry cleaners, gas stCltl0n.r). which we swed by bwer wage kmployt who create a demand for lower income housing.
VI.
- (the supply of land has not been reduced by residential housing.
Rather, it's reduced by government itself - HBS, open space requirements,
growlfi management plans, setbacks, lot coverages. ea.)
- Affordable housing is impossible to pace when paying $It?.(
processing fees plus $20,000 in Facility Management Fees plus complying u
sningent City policies
- (Population is not c~ated by residemid development. Populatic created by the commercial seculr and job growth! The City's own documenU
recognizes this as well as SANDAG.
attachments:
SANDAG document
Inclusioanry matrix
cartoon
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3. Beip Make Housing More Affordable by Increasing Incomes and Lowering Costs
Discussion
Affordable housing is a hndamental determinant of a family's quality of life. And this region has a
shortage of affordable housing. Even with the recent declines in housing values, most people stili
cwot aord to buy a house in the region. For example, in &til 1993, a median-priced detached
home in San Diego costs $118,000. With a $17,800 down papent, this price would require m
income of $66,000 per year, fifty percent m5re than HUD's 1993 estimated regional median
income of approximately $44,000. Furtfiennore, the'maximm "affordable" home price a
household with an income of $44,000 can afford is about $119,000. Not surprisingly, the
proportion of the region's households living in owner occupied units felt between 1980 and 1990.
Homeowners now make up about 54% of the total. The San Diego region currently ranks fourth
lowest in this measure of economic health among 80 U. S. metropolitan areas. Home ownership
could continue to decline and fall bdow 50% of the total occupied residences during the next 15
years.
The b;& cost of housing &o has economic con$tquences. It sects business location decisions
and wage rates. SNAG reviewed severd suweys of business location ddslon makers as part
of the research conducted for this Economic Prosperity Strategy. The weys revealed that
"quality of life" factors are important considerations in selecting sites for new or expanded
businesses. In two of the national surveys, for example, housing affordabiility was ranked as the
second most important quality of fife criterion. In other words business people understand tha
the well-being of their enterprise is directly related to other aspects of the local economy.
The region must do more than merely coexist with or complain about high housing casts, ar
local governmeats should not confine the issue to staterequired general plan housing elemenl
The business suneys suggest that housing affordability iS an integral part of the region's econon
This is an important point: We should define housing affordability as an economic PfObkP
rather than as simpty a "housing" problem or a "land use" problem.
s 24
'. ' 0 0 c,
This strategy for economic prosperity focuses on increasing family income, thus giving the
region's residents more home purchasing power. But we should tower housing Costs as We!!.
Housing costs are determined by many fwors. Some of these factors, such as materials and
financing costs, cannot be controlled entirely through local action. Other factors can be
controlled or influenced localty. These include land prices, the types of housing built, and fees
and regulations.
Land Prices
Twenty years ago, the local mle'of thumb was that land costs represented 20-25% of the price of
a new house. That figure is higher now. Since 1970, the cost of developed and developable land
has probably risen as much as, or more than, any other item, product or se&e in &s region
(with the possibfe exception of health care). For my peopk, real estate investment and
speculation are a way of life. Despite its boom and bust nature (currently, bust), they see real
estate profits as the best way to augment stagnant working incomes. Houses are investments
rather than shelter.
Large vacant parcels suitable for development often are sold more than once as they progresi
through planning, design, and construction. The prices, of course, are higher each step along th
way.
Real estate speculation will continue in the region. Nevertheless, local governments can reduc
its effects on home prices by improving some aspects of land use regulation.
Buil- Ho usinn to Su h the Mark@
The region's residential builders and local govments should focw on housing needs of tl
communities and neighborhoods within cities to produce rnwe affordable market rate housir
The City of San Diego successllly used this kind of focused approach to create more single roc
occupancy (SRO) hotels for generally low-income residents in downtown San Diego. It shot
be adaptable to other communities as well.
25
e L I , 7'.
The first step in this kind of program is to acknowledge housing supply problems where they exkt
in local areas: in communities and neighborhoods. Housing elements of local general plm
document housing needs city or countywide. However, housing demands in neighborhoods an(
communities often vary significantty tiom the cityxide market.
Next, the 10d area-market shauld be analyzed to identify .family Status, ages of liouseholder!
incomes and other demographic and economic factors usehl in determining housing. affordabili
criteria and prefererices. Such suweys will likely require substantial original research rather'th
reliance only on secondary data sources. The purpose ofthe suweys is to document fur residenl
builders and lenders the red housing needs of the communky(s).
Third, local government, residential builders, and other interested parties should sponsor bousi
design exhibitions to illustrate the types of unjts that best meet the local market needs. This SI
gives local residents and prospective builders a better idea of how new housing will fit into I
existing comunity.
Finally, local government should id@ the building, zoning and other development costs 1
should be changed to accommodate the types of housing needed in the community. This ste
important because the market analysis and the design exhibition could identa the inapplicab
of some citywide development regulations to specific community or neighborhood conditions.
Fees and Rem1 ation
Today, there is a fec for nearly every service associated with land development. These kin(
fees are intended to pay the costs of mitigating the impacts of new construction. Schools
special districts, as well as Cities and thecounty, charge them. In some communities total fec
a new house can ~dst a~ much a~ $23,OoO.
Development fees are imposed in California cornunities primarily because Propositic
reduced loaf government's access to the property tax as a-mcans of paying for 1
26
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improvements. Development fees are, in fact, companions to Prop 13: Both charge the hon
buyer a premium to enter or "move up" inthe state's housing market
Fees are not Iikely to be reduced, but fee collection can be consolidated by action of the agencie
charging them. Consolidation of fee collection would be consistent with the current efforts b
local agencies to "streamline" their regulatory procedures.
Developers and other: businesses want "certainty" in the regulatory process. Land developers
have faced a series of environmental regulations over the past ten years. Each regulai;on has
reduced the amount of developable land available to them.
Now, habitat conservation planning (mentioned in the section on federal and state regulation) is
likely to fbrther restrict the supply of available land.
The current emphasis of the Regional Growth Management Strategy is to find a balance among: * the likely addition, according to the Series 8 Growth Forecast, of more than a
mifIion people to the region's population by 201 5;
* an Economic Prosperity Strategy that adds; more high value-added jobs to the
region's mnamy:
* federal and state guidelines to preserve habitats for "endangered" or "threatened"
plants and animals; and
* local general plans that designate finite amounts of land for new or redevelopment.
Analysis thus far has sh& that the region has enough - more than enough - land reserved for
new employment sites through at least 2015. However, land for single and multiple family
housing at urban densities will be in short supply after 2000.
The local jurisdictions should ensure, through the Conservation plans and the Series 8 Regional
Growth Forecasts, that their general plans designate enough developable land to accommodate
27 *
k 0 e .. 1 E, Y-
the forecasted population and employment. This issue will be a key element of the Regior
Growth Management Strategy.
28
> . a 0 c. C.dy(!J '<-,b , II, L 1
/&I\ FIELDSTONE eZdaLA COSTA - L' ,.$,$-il<
erl-Y MAN&
Councilnember Ann Kulchin c%?+st'
September 21, 1993 <m; &4 4
dig& Mayor Claude E. Lewis Mayor Pro Tem Margaret Stanton
Counc i lmember Ramona Finn1 la
lee
Councilmember Julieanne Nygaard
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, California 92008
Re : September 21, 1993 Meeting
Items on Housing In-Lieu Fee & Impact Fee
Dear Mayor and Councilmembers:
This evening you will consider the imposition of two new imp;
fees on new residential development in the City of Carlsbad. 5 proposed in-lieu fee is $12,000 per unit; the impact fee is $21
per unit.
We have commented upon the City's inclusionary housing requireme and implementing provisions thereof since at least summer, 19
both by way of public testimony and written correspondence. Wh
acknowledging the need for varieties of housing to accommodate citizens of the City, we have consistently questioned the cit . single-minded action in assessing 100% of the responsibility new, residential development, and renew that objection with re<
to any action to implement these fees.
In past correspondence and public testimony, we have attemptec
show chat the City's actions lack the appropriate and leg,
required showing of the "nexus," or cause-effect relation
between the need for affordable housing and the demand for
created through new, residential development. We have expresse opinion that approximately 90% of the City's affordable hou need is the result of past inactivity. It is not our inten-
again debate this issue as we recognize there is a differenc
legal interpretation on this issue.
However, our previous discussions of this issue did lead to
understandings with staff concerning the equity of assessins
appropriate share by way of a fee on new, non-reside] development, and the requirement as stated in Program 4.1 O! Housing Element to conduct a nexus study for the City of Car as opposed to continued reliance in total on the SANDAG documi We have previously submitted information that a documented li. fee for the City of San Diego would range from $27.59 per sq
1'0 !~c~u'JOOO 200 + i ~itl\l~~d ( \ O~l~l~~Ol~~ 'J:l X'i7 4 I \\ (110 O\l I'JJ(1
1 0 0 '; A t 1; -
?aye 2
Mayor Lewis and Councilmembers
September 21, 1993
foot for retail use to $2.65 per square foot for warehouse use (e, letter to Michael HdZmiller dated October 30, 1992-'
Therefore, it appears that the impact of non-residentia
development is significant.
In addition, we believe staff also recognized that Cit participation was going to be an essential component of an
successful program and that a Housing Trust Fund with definc
programs would be established so that the person paying the fc would at least know where the money was going.
It was our understanding that all three of these items were to I:
moved forward by June of 1993.
However, it is now September, 1993, and what is before the Counc
is the adoption of additional impact fees on new residentil
development, without the accompanying programs which add so1
equity to the situation.
Since the inclusionary housing program was first specifical discussed as part of the revised Housing Element in 1991, t
economic condition of development in Carlsbad as well as all of S Diego County has seriously declined. This is not news to you.
have observed other jurisdictions recognizing this factor wl
considering housing programs. Some jurisdictions have declined
s act; others have adopted fees far below the exact 100% "g; figure; and still others continue to study the problem. Given tl the proposed fees before you, if adopted, together with
Contemplated Rancho Santa Fe Road "pre-pay" add $25,000 to the
burden on each house in Zone 11, we question the wisdom of impos
these fees at this time. We believe it makes an already diffic task of obtaining financing impossible in today's market.
We strongly urge the Council to continue any action on these it
until staff has fulfilled its representations to the resident development community to bring in non-residential development to adopt specific programs to which these future fees dedicated.
Sincerely, ,, /)
i /&;l{,7
DOUG AVIS
DA:rab
1 I- . 19, :b > 0 e
Page 3
Mayor Lewis and Councilmembers
September 21, 1993
cc: Mike Stewart, The Fieldstone Company Ray Patchett, City Manager
Ron Ball, City Attorney
Marty Orenyak, Community Development Director
Michael Bolzmiller, Planning Director
Chris DeCerbo, Planner Evan Becker, Housing & Redevelopment Director
.
Carlsbad SUN
Decreed A Legal Newspaper by the Superior Court of San Diego County
Mail all correspondence regarding public notice advertising to W.C.C.N. Inc. 2841 Loker Ave. East, Carlsbad, CA 92008 (619) 431-485
Proof of Publication
STATE OF CALIFORNIA, ss.
COUNTY OF SAN DIEGO,
I am a citizen of the United States and a resident of the county aforesaid;
I am over the age of eighteen years, and not a party to or interested in the above entitled
I am principal clerk of the printer of the Carlsbad Sun, a newspaper of general circulatioi
published weekly in the City of Carlsbad, County of San Diego, State of California, and whicl-
is published for the dissemination of local news and intelligence of a general character, and wh
per at all times herein mentioned had and still has a bona fide subscription list of paying subs
which newspaper has been established, printed and published at regular intervals in the s
Carlsbad, County of San Diego, State of California, for a period exceeding one preceding the date of public2
notice hereinafter referred to; :
notice of which the annexed
copy, has been published in e
and entire issue of said newspz
in any supplement thereof on
ing dates, to-wit:
September 09
NOTICE IS HEREBY GIV311@nge and look for
Carlsbad will hold a public%@, the broadcaste
1200 Carlsbad Village DriW$--
Tuesday, September 21,19fthat their uie~ers
nary Housing @-Lieu F;use t,,ey have been
I certify under penalty of perjur]
foregoing is true and correct. Ex
Carlsbad, County of San Diego,
California on the 9 th September, 195 day of
If you challenge the
ary Housing In-Lieu F
q4 c i
qrr7 / i __ g/,; i; ,\t
v ii Clerk (
' 4 +I I Ctrlsbad S?JN
Decreed A Legal Newspaper by the Superior Court of San Diego County
Mail all correspondence regarding public notice advertising to
W.C.C.N. Inc. 2841 Loker Ave. East, Carlsbad, CA 92008 (619) 431-4850
Proof of Publication
STATE OF CALIFORNIA, ss.
COUNTY OF SAN DIEGO,
I am a citizen of the United States and a resident of the county aforesaid;
I am over the age of eighteen years, and not a party to or interested in the above entitled n
I am principal clerk of the printer of the Carlsbad Sun, a newspaper of general circulation
published weekly in the City of Carlsbad, County of San Diego, State of California, and which
is published for the dissemination of local news and intelligence of a general character, and whi,
per at all times herein mentioned had and still has a bona fide subscription list of paying subs
which newspaper has been established, printed and published at regular intervals in the s
Carlsbad, County of San Diego, State of California, for a period exceeding one
preceding the date of publica
I -
NOTICE IS HEREBY GIVEN that the City Council of the City of Carlsbad will hold a public hearing at the City Council Chambers, 1200 Carlsbad Village Drive, Carlsbad, California, at 6:OO P.M. on
If you have any questions regarding this matter, please call Chris DeCerbo, in the Planning Department, at 438-1161, ext. 4445.
CARLSBAD CITY COUNCIL
INCLUSlONARY HOUSING IMPACT FEE
ITICE IS HEREEY GIVEN that the City Council of the. City of Cadsbad will hol lubtic hem'ng at the City Council Chambers, 1200 Carlsbad village Drive, '
rlsbad, Ca1ifomia;at 6:OO P.M. on Tuesday, September.21, 1993, to consider
1 adoption of an lnclusionary Housing Impact Fee, and Formula for calculating a'
Impact Fee. '
XJ have any questians regarding this rtntter, please call Chrls De nning Department, at 438-1 161 y extension 4445.
3u challenge the aduptior! and/or calculation of act Fee in court, you may be limited to raising onl
omeone else at the public hearing described in
espondence delivered to the City of Carlsbad City Clerk's Offi public hearing. .
- I c:.
."
LICAN? CityofCarlsbad - LISH: September 9, $993 j