ITEM 12-A

Council Meeting: March 28, 2000 Santa Monica, California

TO: Mayor and Members of the City Council

FROM: City Staff

SUBJECT: Recommendation to Adopt Resolution Revising the Existing Affordable Housing Base Fee for New Market Rate Condominium Development

This staff report recommends that the City Council adopt a Resolution increasing the Affordable Housing Base Fee for new market rate condominium development.

On July 21, 1998 the City Council adopted the Affordable Housing Production Program. This program requires developers of market-rate multifamily housing to assist in the production of affordable housing through payment of an affordable housing development fee, development of on-site affordable units, or through other specified options. The ordinance provides that an affordable housing base fee may be established at least every two years by resolution of the City Council.

On July 28, 1998, the Council adopted Resolution 9295 establishing base fees of $6.14 per square foot of floor area (as defined in the Zoning Ordinance) for new market-rate apartment projects and $7.13 per square foot of floor area for new market-rate condominium projects. These fees were established after comprehensive analyses performed by Hamilton, Rabinovitz & Alschuler (HR&A) of potential governmental Aconstraints@ associated with such a fee (AConstraints Analysis@) as well as a careful examination of the Anexus@ between new market-rate multi-family construction and the need for low income housing (ANexus Study@).

In particular, the Nexus Study focused on the relationship between the demand for goods and services created by households who occupy new market rate multi-family development in the City, the number of low-wage workers in public agencies and businesses needed to satisfy this demand, and the costs of producing the affordable housing needed by these workers. The Nexus Study demonstrated the fee range per square foot which could be imposed on new market rate multi-family development to help finance the development of affordable housing needed to meet the demand created by market rate development.

HR&A also concluded that the fee of $6.14 per square foot of floor area imposed on new market rate apartments and the fee of $7.13 per square foot of floor area imposed on new market rate condominiums would not constitute a governmental constraint.

On May 25, 1999 the Council placed a moratorium on multi-family development and, in part, directed staff to analyze the changes in market conditions for condominium development since the affordable housing fee was first established and the impact that these changes had on the analysis performed for both the Nexus Study and Constraints Analysis. Accordingly, HR&A recently updated the original 1998 Nexus Study and Constraints Analysis to reflect these changed market conditions. As reported to the City Council on March 7, 2000, the updated studies led to the conclusion that the fee for condominiums may be increased to $11.01 per square foot (which is an increase of 54% over the current fee of $7.13 per square foot).

On March 7, 2000, the City Council directed staff to prepare a new fee resolution to reflect the updated fee analyses performed by HR&A. The attached fee resolution will increase the affordable housing fee for condominiums to $11.01 per square foot. HR&A=s findings are detailed in copies of the Constraints Analysis and Nexus Study updates provided in Attachments B and C for reference.

The amount of fee revenue produced as a result of this resolution depends on the number and scale of projects that apply for permits. Development fees collected pursuant to an ordinance are deposited into a deferred revenue account until they can be programmed for use in accordance with established budget procedures and necessary Council approvals. Approval of the Resolution Increasing the Affordable Housing Base Fee does not have a financial or budgetary impact at this time.

It is respectfully recommended that the City Council adopt the attached Resolution Revising the Affordable Housing Base Fee for New Market Rate Condominium Development.

Prepared by:

Jeff Mathieu, Director of Resource Management
Bob Moncrief, Housing and Redevelopment Manager
Tad Read, Senior Development Analyst
Ellen Alderman Comis, Senior Administrative Analyst

Attachments:

A RESOLUTION REVISING AFFORDABLE HOUSING BASE FEE

B Constraints Analysis and Nexus Study; Condominium Review (Not available electronically.  Available at the City Clerk's Office and at the City Libraries.)

C Constraints Analysis and Nexus Study; Update(Not available electronically.  Available at the City Clerk's Office and at the City Libraries.)