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City of Pleasanton Lower Income Housing Fee Study Proposal September 18, 2012 the City, based on General Plan development capacities. In response to the Patterson case (and to a lesser extent, the Palmer case), EPS's recent work establishes the reasonable relationship that the production of market-rate housing at various price points has on demand for affordable housing (as described below), irrespective of General Plan capacities, Regional Housing Needs Allocations, past inclusionary housing requirements, or other policy- based parameters. Similarly, the demand for affordable housing that is attributable to job growth is a function of the operating parameters typical of different types of.employment-generating development (e.g., employee densities, occupational wages, etc.). In many cases, these parameters have changed dramatically since 1990, and should be revisited. Also, the current practice of charging the same fee to multiple types of employment-generating uses should be reviewed for fairness and the financial feasibility Implications, given the distinct operating parameters of each as well as their construction costs and achievable rents. • Allocation of housing obligations among housing types and nonresidential development - The previous studies and resulting policy decisions placed a proportionately greater burden for affordable housing fees on single-family units than on multifamily projects, and also placed more of the burden on residential builders than on commercial/office/industrial (C/0/I) builders. EPS's more recent work allocates the affordable housing responsibilities based on the price of residential development, rather than its type, recognizing that market trends in specific locations do not always yield lower values for multifamily units than for single-family units. At the very least, EPS would revisit the 3:1 ratio between housing fees for single-family vs. multifamily units that was recommended by the Task Force. Also, EPS intends to revisit from both a technical and policy oasis the past decision to allocate to C/O/1 uses only 25 percent of the affordable housing demand generated by those uses. • Availability of alternative funding/construction resources - The current fee program assumes 10 percent of the affordable housing need will be met without subsidy by market- rate developers. The fees also assume that 20 percent of the funding required to subsidize affordable housing production will come from other sources, such as tax credits, grants, and inclusionary housing units provided (as opposed to in-lieu fees). These assumptions can be tested based on the City's experience with affordable housing production over the past two decades, including recognition of the particular constraints on funding in recent years. • Approaches to"indexing"affordable housing fees to changing market conditions - The previous study suggested that the affordable housing financing gap was likely to grow over time, and the Task Force recommended the fees be adjusted annually based on the Consumer Price Index (CPI). While this is an accessible figure that reflects general economic dynamics, the specific inputs to affordable housing financing gap calculations include dynamic land and development costs, affordable housing income levels, investment practices, and real estate market conditions. EPS will suggest alternative methods for updating the fees on an annual basis, including an assessment of the trade-offs between providing technically-derived updates vs. using a more generic economic indicator such as CPI. Economic&Planning Systems, Inc. 4 A+-Iomuosarsu21 su2,nsaMsintonui,,sot=t_o9,ne.doc