1. Affordable Housing Fees Study
presented to
City of Watsonville
presented by
Darin Smith and Michael Nimon
May 31, 2018
Oakland
Denver
Los Angeles
Sacramento
Economic & Planning Systems, Inc. One Kaiser Plaza, Suite 1410, Oakland, CA

2. Presentation Overview
Introduction
Fee Calculations
Comparison to Other Jurisdictions
Feasibility Findings
Fee Level Recommendations
Questions?
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3. About Economic & Planning Systems (EPS)
Consulting on land use plans and policies since 1983
Work for both public and private sector clients
Extensive housing-related experience:
Nexus and In Lieu Fee Studies
Sonoma County, Santa Rosa, Rohnert Park, Walnut Creek, Sunnyvale, Mountain View, San Mateo, Palm Desert, Burbank, Calistoga, Pleasanton, Petaluma, Alameda, Mono County
Inclusionary Zoning Ordinances
Housing Elements
Gentrification and Displacement Issues
Market and Feasibility Analysis
Density Bonus Implementation Studies
Community Benefits Negotiations
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4. EPS Scope of Services
Reviewed existing affordable housing ordinances and fees
Calculated maximum fees
Ownership Housing In-Lieu Fees
Rental Housing In-Lieu Fees
Commercial Linkage Fees
Surveyed fees in other jurisdictions
Tested feasibility of maximum fees to inform fee level recommendations
Present: Working with staff and stakeholders to establish appropriate fee level updates and other related policy updates
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5. Watsonville Affordability Definitions
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6. Financing Gap to Build Affordable Housing
Example of Key Inputs for Median Income Households
Assumes City would subsidize rental apartments averaging 3BR
Costs based on market prices for land, labor, materials, and capital
Values determined by household income level
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7. Financing Gap to Build Affordable Housing by Income Level
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8. For-Sale Residential Development In-Lieu Fee Calculation
In lieu of building units onsite, developers pay City to subsidize affordable units elsewhere in the City.
On-site requirement and distribution vary by project size
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9. For-Sale Housing In-Lieu Fee (Maximum)
Fee is equivalent of 15% Inclusionary Requirement
Cost of inclusionary requirement:
5% median-income units
5% moderate-income units
5% above moderate-income units
EPS calculation of
$19,001 per market-rate unit
Economic & Planning Systems, Inc.

10. Rental Residential Development In-Lieu Fee Calculation
In lieu of building units onsite, developers pay City to subsidize affordable units elsewhere in the City.
On-site requirement is 20% inclusionary with the distribution shown below
Economic & Planning Systems, Inc.

11. Rental Housing In-Lieu Fee (Maximum)
Fee is equivalent of 20% Inclusionary Requirement
Cost of inclusionary requirement:
5% very low-income units
5% low-income units
5%Median-income units
5% Section 8 units
EPS calculation of
$36,579 per market-rate unit
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12. Commercial Linkage – Nexus Calculations
New businesses
Additional job creation
Lower income employees need affordable housing
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13. Commercial Linkage – Example
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14. Commercial Linkage – Maximum Fee Levels
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15. Comparable Jurisdiction Map
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16. Ownership Housing Fee Comparison
Map of Surveyed Jurisdictions
(Colored Jurisdictions)
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17. Rental Housing Fee Comparison
Map of Surveyed Jurisdictions
(Colored Jurisdictions)
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18. Commercial Linkage Fee Comparison
Map of Surveyed Jurisdictions
(Colored Jurisdictions)
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19. Cost Incidence of a Fee
Analysis conservatively assumes cost is borne by the consumer, who must pay higher prices or rents for a developer to receive reasonable return
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20. Feasibility Test Example
EPS-Calculated Maximum Fee
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21. Feasibility Test Findings
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22. Feasibility Test Findings
Watsonville’s existing affordable housing fees are generally consistent with other surveyed jurisdictions
Maximum single family in-lieu fees appear to be feasible and within comparable range
Maximum multifamily in-lieu fees are well beyond the range and threaten feasibility
Maximum fees calculated in commercial linkage nexus studies greatly exceed feasible levels
Linkage Fees more consistent with the range among the surveyed jurisdictions appear feasible
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23. Fee Level Recommendations
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24. EPS/City Staff Fee Recommendation
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25. Questions?
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