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Nonresidential Housing Linkage Fee Nexus Study Draft Report 02/26/18 Affordability Gap Results Table 11 shows the subsidies for construction of for-rent apartments for households at various income levels. For all income categories, the cost of constructing the unit is higher than the value of the unit. This is considered the "affordability gap,"and serves as the basis for calculating the subsidies required to provide housing for the employees who will be working in new nonresidential development in Pleasanton. The funding gap for units affordable to median and moderate income households are lower, suggesting that a higher share of the new construct cost could be supported without subsidy. Fee Calculation Tables 12 through 14 provide the maximum nonresidential housing fee calculations for each of the three employment categories. Assuming a 100,000-square foot nonresidential building prototype for each employment category, the number of new households by income category is multiplied by the per-unit affordability gap to determine the level of subsidy required to provide housing for the new worker households. The adjusted affordability gap is then divided by the size of the assumed building or land to determine a maximum fee per building square foot. While the City has the option of adopting fees up to the maximum levels calculated, EPS does not recommend the City adopt the entire maximum fee. There are several factors compounding the issue of housing affordability; insufficient wages relative to development costs constitutes just one factor. Market forces, land use regulations, construction costs, and entitlement costs also impact housing affordability. In addition, revenue generated through this fee program is just one source of potential subsidy funds to help finance affordable housing projects. Finally, adoption of the maximum fees for certain employment categories would represent a very large addition to the costs of development, and could hamper the City's economic development objectives. EPS, therefore, recommends that the linkage fee adopted be 10 to 20 percent of the maximum calculated fee. Other California communities—including Sacramento, Rohnert Park, Walnut Creek, Sunnyvale, and the County of Sonoma, among others—have made similar reductions to the maximum allowable fee when adopting their fee program, for reasons such as those cited above. Economic& Planning Systems, Inc. 17 P,151000s,151111Pleasanlonfs,PWortWMwEatt Houstn01511I ComfNeu.uay_o 26Iad�