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One important consideration with off-site construction is the allowable geography — how far from the development site. Given that the inclu- sionary requirement seeks to foster mixed -income neighborhoods and reduce segregation, even if inclusionary units can't be produced on-site in a new development, they should be produced nearby. In cases where that isn't possible, the jurisdiction should ensure that they are dispersed equitably throughoutthe community and not clustered in lower-income neighborhoods. Jurisdictions also typically require more units to be built off-site than would be required on-site. This means the value of the cost savings over on-site construction is captured and translated into a community benefit, and that the policy properly expresses an appropriate preference for on-site units. Ensuring on-site and off-site construction have similar costs incentivizes on-site construction (which should be the norm), while still providing a meaningful alternative for those projects that can't feasibly accom- modate on-site affordable units. Another best practice is to require that the off-site units be constructed before or concurrent with the market -rate units, which can be achieved by having the off-site units finished before building permits are issued for the market -rate development site. That way an off-site alternative doesn't simply become an escape hatch to avoid complying with the site's inclusionary requirement. Land donation Land donation can be a useful option where affordable -housing developers have difficulty finding building sites. Paired with in -lieu fees or other sources of affordable -housing funding, dedicated land can be used to produce needed types of housing that might not otherwise get built, such as homes for people with special needs or permanent supportive housing. However, jurisdictions must establish clear parameters for exercising this alternative. Donated land should be equivalent or greater in value to the affordable units that otherwise would have been produced on-site, and should be ready for development at the time it is donated. It is also important here to consider the allowable geography to make sure that the required affordable units are not concentrated in certain neighborhoods. 6. Include procedure for requesting waivers or reductions. An inclusionary requirement may not withstand legal scrutiny if it doesn't include a process by which a developer can request a waiver or reduction of the requirement. Much like the inclusionary requirement itself, the waiver process should be as clear and specific as possible, detailing both the procedures for requesting the waiver — process, timeline, appeal procedure — and the standards by which the request will be evaluated. Feasibility Studies While not required by state law in California, preparing a feasibility study in support of an inclusionary requirement helps ensure that the require- ment is right -sized for local conditions. It's important not to set an inclusionary requirement so high that it stops development, and equally crucial not to set it too low and miss out on affordable units. A feasibility study is an opportunity to analyze local market conditions and the economics and tradeoffs of various policy options — affordability percentages and levels, incentives — to make sure the ordinance delivers the number and type of affordable units that a community needs. It also provides a data -driven foundation for the requirement, which can help overcome opposition by showing that it can be implemented without impeding the developers'ability to earn a profit. The California Department of Housing and Community Development generally requires local jurisdictions to analyze inclusionary requirements as a potential constraint on development in their housing elements. A feasibility study can help demonstrate that the requirement isn't a barrier. NEXUS STUDIES: Feasibility studies should not be confused with nexus studies. A jurisdiction must prepare a nexus study to impose an exaction. A nexus study would be required if a jurisdiction wanted to adopt a commercial linkage fee, for example, where it must show that the amount of the fee is roughly proportional to the need for affordable housing generated by new commercial development. An inclusionary requirement is not an exaction but rather a land -use regulation, much like a density requirement or a height restriction, and need only be related to advancing a legitimate purpose. A nexus study is not required when adopting a traditional inclusionary ordinance. For more information about the preparation of feasibility studies for inclusionary studies: inclusionaryhousing.org/resources/#feasibility V a e• Y C• 9'i s: r •Y Y• 4 V ti• Y r i 0,4 •! r a■ •.Y-tw�•= =.0 -• z The waiver or reduction process should be carefully structured so that it functions as the exception and not the rule, and is only used in rare cases. The City of Napa's inclusionary requirement withstood a constitutional challenge in part because it included a waiver -request provision. The City used a constitutional test to determine whether a waiver would be approved, under which the developer had to show that the requirement as applied would be unconstitutional. Other jurisdictions apply a hardship standard, allowing for a waiver or reduc- tion if the developer can show that the requirement would deprive them of all economically viable use of the land. An economic -hardship standard should not be about the level of profit, but about whether any profit can be made. MEETING CALIFORNIA'S HOUSING NEEDS: BEST PRACTICES FOR INCLUSIONARY" HOU51i,1G �