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2. Get the numbers right: how many, where, when and for how long? How many affordable units should be required and to whom should they be affordable? An inclusionary ordinance should clearly define how many affordable units must be included in a project and at which income levels. The vast majority of ordinances set the requirement as a percentage of the total number of units in the project, while a few communities use a square -footage metric. LOW AND VERY -LOW: The requirement will typically be split between low - and very low-income households (for example, 15% of the total are affordable units, with 10% low and 5% very low). Some laws also include a target for extremely low-income households. MODERATE: Some communities also require moderate -income units, but this should be based on a careful analysis of the market and its ability to serve moderate -income households. If the market is producing moderate -income units on its own,there would be no rationale for having a inclusionary requirement for moderate -income units. In California, the requirements in most inclusionary policies adopted so far have fallen within the 10-20% range — 15% being the most common. What percentage a community establishes will be dependent on its affordable housing needs, local market conditions,the financial incentives available to developers, and the mix of affordability levels required. FIXED: Some communities require fixed percentages at each designated income level, whereas others may provide some flexibility (for example, allowing for a lower percentage of inclusionary units overall when the units are provided at a deeper affordability level). FLEXIBLE: Some jurisdictions structure their inclusionary policies to involve a sliding scale, so that projects that include higher percentages of affordable units also qualify for more incentives, such as greater density increases. While there may be reasons to build flexibility for the required number of affordable units into an ordinance, too much flexibility can undermine the creation of new housing at the income levels needed most and cannot be produced by the market alone., Which projects should have to comply with the inclusionary requirement? While it may be tempting to carve out various exceptions to an inclusionary requirement, the best practice is to apply the requirement to all housing - development projects throughout a community or the geographic area covered by the policy. This is the best way to ensure that the policy is implemented equitably and serves the overall goal of ensuring that all neighborhoods — single-family and multi -family, lower -density and higher - density — incorporate housing options at a range of income levels. SMALL PROJECTS: Many jurisdictions choose to exempt small projects from complying with an inclusionary requirement. The rationale is often to ensure that smaller development projects are financially feasible. While a small - project exemption may be well -intended, it can be difficult to reconcile an exemption with the ordinance's overall goals and create potential legal issues. It can also be a challenge to settle on a definition of "small"that doesn't simply encourage projects that come in just under the threshold, thus frustrating the goal of ensuring that all new housing development contributes to meeting the community's affordable -housing needs. Rather exempting these projects altogether, a better practice is to provide small projects with the option to pay an in -lieu fee as an alternative to compliance with on-site production requirements. This is particularly true in areas where a high proportion of development activity occurs on smaller projects. Should inclusionary requirements be different for for -sale projects and rental projects? In most jurisdictions, the most defensible ordinance will be one that imposes an inclusionary requirement equally on rental and for -sale housing. Requirements that treat the two differently may have fair - housing implications and, much like exemptions for small projects, can be challenging to reconcile with the ordinance's goals. For example, an ordinance that requires the inclusion of low- and very low- income units in rental developments, but only moderate -income units in for -sale developments, could run counter to the goal of ensuring that all neighborhoods have a mix of housing at all income levels in cities where rental and for -sale development generally happen in different neighborhoods. Furthermore, depending on local demographics, such policies may lead to disparate impacts on certain protected classes, potentially violating legal requirements. In weighing whether to impose the same or different requirements on rental and for -sale housing, it's crucial to consult with an attorney with expertise in fair -housing laws. RENTAL/FOR-SALE MIX: One way to maximize the production of affordable units and increase flexibility is to allow developers of single-family projects the option of meeting the inclusionary requirement by including affordable multi -family rental units within the development rather than affordable for -sale, single-family homes. However, this option should be crafted carefully to ensure consistency with the ordinance's overall goals and fair -housing obligations. Rental units can generally be produced more cost-effectively than for -sale units, so this option should reflect that by requiring that higher percentage of rental units be produced. MEETING CALIFORNIA'S HOUSING NEEDS: BEST PRACTICES FOR INCLUSIONARY HOUSING a