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BACKGROUND The City initially adopted a Lower Income Housing Fee (LIFIF) for residential development as part of its growth management program in the late 1970s. In 1989, in cooperation with a community task force and consultant services, the LIHF was amended to apply to all new residential and commercial properties. This effort also included the establishment of a methodology/model used to assure that the fee was consistent with California AB1600 and the City's affordable housing needs. City staff conducted updates to the 1989 model in 1998 and 2003. Since 2003, the LIHF has only been amended to be consistent with CPI adjustments specified in fees enabling ordinance. The current lower income housing fees are as follows: • Single family home- $10,382/unit over 1,500 sq ft • Single family home -$2,573/unit under 1,500 sq ft • Multi family home-$2,573/unit • Commercial, Office and Industrial development (C/O/I)- $2.74/square foot The purpose of the LIHF is to provide an alternative to providing affordable units as part of new construction. When a fee is paid, funds are placed in the Lower Income Housing Fund (271900) to provide financial assistance for affordable housing projects or City efforts to promote affordable housing. The recently adopted General Plan Housing Element Amendment includes a number of specific programs and policies requiring further study. One of these, Program 17.1, states "Review and modify the lower-income housing fee annually in conformance with AB1600, and consider changing the basis of the fee to reflect the true cost of providing housing." To address this and other Housing Element related matters, the Housing Commission reviewed the City Council approved implementation plan adopted on April 3, 2012, and identified the need to follow through with Program 17.1. This need mirrors staff's assessment that it is advisable to review LIHF methodology fully to identify any appropriate changes or adjustments. DISCUSSION As indicated above, the current methodology used for determining the amount and applicability of the lower income housing fee has been in place since 1989. However, recent court decisions have resulted in cities reassessing their lower income housing fee to assure it is consistent with these decisions. As such, the scope of work for this project will include: • Developing a nexus between the need for affordable rental and ownership housing • A non-residential nexus analysis that will look at commercial fees and impacts • A LIHF feasibility analysis that will assess the impact of various fee amounts • A survey of lower income housing fees in other jurisdictions • A final report To assure appropriate public comment, staff will process the study through the Housing Commission including one public meeting to receive public and comment regarding the current and proposed methodology and one meeting to present study results. The Page 2 of 3