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BACKGROUND The City's Inclusionary Zoning Ordinance (IZO) was adopted to establish a clear and attainable plan for using the limited remaining developable land in a manner that is consistent with City housing policies. To that end, the IZO establishes that 15% of all units in a new residential multi - family rental development in excess of 15 -units shall be rent - restricted to very low (50% of the Area Median Income or AMI; currently $44,250 for a four person household) and low income households (80% of the AMI; currently $70,800 for a four person household) and that 20% of all units in a new residential ownership development be made available to very low, low income households and /or moderate income (120% of the AMI; currently $106,200 for a four person household) households. A table showing all income levels and corresponding rents is included as Attachment 3. In addition while the IZO is clear in stating that its goal is to obtain affordable inclusionary units, it does recognize that this may not always be practical and as such, it lists alternatives including: • Provide for inclusionary units at a location within the City other than the project site • Dedication of land to a non - profit housing developer for development of affordable units • Credit transfers that allow one unit with an excess in the number of affordable units to make them available to another development • Other alternatives approved by the City • Payment of the City's Lower Income Housing Fee (LIHF) As indicated above, if the City approves payment of the LIHF an applicant would pay $2,696 /unit for each multi - family residential development and single family homes under 1,500 sf in lieu of providing affordable units. The fee for single family homes in excess of 1,500 sf is currently $10,880 /unit and the fee for commercial development is $2.87 per sf. It should be noted that in accordance with long term practice, the fee option is considered only after all other options are determined to be impractical. The uses for the LIHF are set forth in City Ordinance 1448 and include such items as land acquisition, construction, rehabilitation, subsidization and counseling or assistance to other governmental entities, private organizations or individuals to expand housing opportunities to lower- income households. In addition, the ordinance states that the funds may be used for moderate income housing as determined necessary and desirable to meet general plan goals and policies. On May 1, 2013, the City Council held a joint Housing Commission and City Council workshop for the purpose of discussing Policy 16 of the City Housing Element that anticipates both a review and modification of the IZO to assure conformance with City goals, state legislation, including the Costa - Hawkins Act, and recent court rulings including the Palmer /Sixth Street Properties L.P. v. City of Los Angeles ( "Palmer') case which held that local inclusionary requirements requiring rent restricted units violate the Costa - Hawkins Act that allows landlords to set the initial rent for a new unit and to adjust rents to market levels whenever a unit is vacated (so- called "vacancy decontrol. Page 2 of 9