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Ei< 413fT A- PROJECT UNDERSTANDING AND APPROACH Project Understanding The City of Pleasanton is seeking to review and update its Lower Income Housing Fee Program, which was initially adopted in 1987, then updated based on studies by Economic & Planning Systems (EPS) in 1990, and has been managed and updated by City staff since that time. The City wishes to ensure that the fee program is adequately reflective of changed economic circumstances, revised development expectations, and recent legal developments. Dynamic conditions to address in this study include the following items: • Changing Legal Framework. Recent court cases (i.e., Palmer, Patterson) have reshaped the landscape in which affordable housing fee programs are implementec and set limits on the use of inclusionary zoning ordinances and in-lieu affordable housing fee programs. Compared to years past, including the period in which the City's current ordinance was adopted, recent case law has created more stringent requirements regarding the need for cities to establish a reasonable relationship between market rate unit development and the need for affordable housing. In addition, the provision of affordable rental product through inclusionary housing ordinances was determined to violate rent-control laws, undercutting ( the City's ability to provide rental affordable housing. While these legal situations may evolve through legislative actions or clarifications, Pleasanton and other cities are aiming to amend their housing programs to remain defensible. • Economic Circumstances. In the wake of the Great Recession, home prices in the Bay Area have fallen significantly from their peaks (circa 2006-07), and real home price appreciation may be very slow to recover. Improved affordability circumstances may mitigate some of the need for subsidized affordable housing development, but the ability of development projects to absorb the costs of providing affordable housing may be more limited than in the past. • Shifting Development Expectations. Emerging trends in consumer preferences, City economic development objectives, and the goals of a regional Sustainable Communities Strategy are expected to direct much new development to infill areas of tie City, where development economics (land and construction costs, parking ratios, etc.;i may be significantly different than were once presumed. • Public Agency Resources. Constrained public agency budgets, the loss of redevelopment funding, and uncertainty regarding federal funding sources have also significantly constrained funding and staff resources available to implement the affordable housing program. Limited resources must be strategically deployed to achieve both affordable housing and economic development goals. Each of these changed circumstances highlights the City's need to revisit Its existing ordinances and re-evaluate strategies for providing affordable housing. While acknowledging the critical role that affordable housing plays in establishing and maintaining a strong and diverse economic base, EPS also recognizes the challenging economic environment in which developers are Economic&Planning Systems, Inc. 1 tome,.,sa Is,12mm,,,21J1cPeea...,mon,,n3Jsm,i_oa„,;.d,.