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Nonresidential Housing Linkage Fee Nexus Study Draft Report 02/26/18 Required Nexus Findings • Identify the purpose of the fee. • Identify how the fee is to be used. • Determine how a reasonable relationship exists between the fee's use and the type of development project on which the fee is imposed. • Determine how a reasonable relationship exists between the demand for the affordable housing and the type of development project on which the fee is imposed. • Demonstrate a reasonable relationship between the amount of the fee and the cost of the public benefit attributable to the development on which the fee is imposed. In 1991, the Ninth Circuit U.S. Court of Appeals upheld the City of Sacramento's nonresidential linkage fee.1 In that case, the court found that the City's fee program "substantially advanced a legitimate interest." EPS is using a similar methodology to the nexus study reviewed in that case to develop the City's fee program. Summary As new employment-generating development continues to occur in the City, additional affordable housing will be required to house a portion of the new lower wage workforce. The cost to construct new housing units is higher than can be supported by the rents that many workers will be able to pay. The difference between costs and affordable rent levels is considered an "affordability gap." The costs allocated to new nonresidential development through this fee reflect this affordability gap that would need to be filled in order to provide housing for additional workforce demanded by nonresidential development. Table 1 summarizes the maximum justifiable fee by employment category and a recommended fee range for adoption. EPS recommends a fee that is less than the maximum justifiable fee and, therefore, presents fees that range from 10 percent to 20 percent of the maximum fee (plus a nominal administrative charge). The lower fee reflects the fact that affordable housing development is not the sole responsibility of nonresidential developers. 1 Commercial Builders of Northern California v. City of Sacramento, 941 F2d 872 (1991). Economic& Planning Systems, Inc. 2P.1000a\151111Pkaaxntanfe\0.eyortMn«crack Nwatrg\6au Commnexassma ousis.aua