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EXECUTIVE SUMMARY Economic & Planning Systems, Inc. (EPS) was retained by the City of Pleasanton (City) to conduct a nexus study analyzing the impact that development of market-rate housing has on the demand for below-market-rate housing and, based on the results, to determine the nexus-based fee that could be charged to market-rate housing development. EPS is also conducting nexus studies for the impact of development on rental housing, commercial linkage, and public facilities needs. These reports are provided under a separate cover. The technical analysis presented in this report was originally completed in 2016 and is largely based on the 2015 numbers. The technical approach used herein quantifies the impacts that the introduction of market-rate units have on the local economy and the demand for additional affordable housing. As new households are added to the community, local employment also will grow to provide the goods and services required by the new households. To the extent that these new jobs do not pay adequate wages for the employees to afford market-rate housing in the community, the new households' spending is creating a need for affordable housing. A nexus-based affordable housing fee is therefore based on the impact of the new market-rate homes on the demand for affordable housing. The fee calculated in this study represents the maximum fee that may be charged to new market-rate housing units to mitigate their impacts on the affordable housing supply. Such fees then may be used by the City to subsidize the production of new affordable units for moderate- and lower-income households not accommodated by market-rate projects. Calculating the impact of market-rate development in the City on affordable housing needs, and the fees needed to mitigate those impacts, involves three main analytical steps: • Step #1. Estimate the typical subsidy required to construct units affordable at various income levels (the "affordability gap"). • Step #2. Determine the market-rate households' demand for goods and services, the jobs created by that demand, and the affordable housing needs of workers in those jobs. • Step #3. Combine the affordability gap with the affordable housing demand projections to compute the maximum supportable nexus-based affordable housing fees per market-rate unit. These technical steps are illustrated in Figure 1 and detailed in the body of this Report and the attached Technical Appendices. The findings regarding each of these steps are presented below. Economic& Planning Systems, Inc. 1 P 151000=151111okasanlonFe 0.epona„e,aa.nw:im 15111i,ewn02261erorsal aa.