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connection (typical size for a single-family home) and by $17,000 for a 1.5” meter <br />that would serve multi-unit development. If CPI adjustments had been made in <br />intervening years, the differential between those hypothetical fees, and new fees, <br />would not be substantial. <br /> <br />• The preliminary analysis indicates that the maximum supportable level of the <br />commercial linkage fee, which is the fee paid by non-residential development to <br />mitigate its impact on affordable housing demand, could increase very <br />substantially (e.g., for commercial, from the current rate of $5.38 per square foot <br />to over $400 per square foot; for office from $14.42 per square foot to over $40 <br />per square foot.) These sorts of maximum values are not atypical outcomes in <br />commercial linkage studies, and most cities choose to discount them <br />substantially, as the City Council did in 2018. <br /> <br />Inclusionary Zoning Rate and Fees <br />The City Council expressed interest in evaluating possible changes to the inclusionary <br />rate, which is currently set at 20% for single-family projects and 15% for multi-family <br />projects. There is an interest by the City Council in considering adjustments (a possible <br />increase) to the inclusionary rate, as well as increasing the Affordable Housing Fees <br />paid by developers in-lieu of building units on site. <br /> <br />• EPS analyzed multiple scenarios with different inclusionary rates for both for-sale <br />and rental projects.1 For for-sale projects, the study considered both an increase <br />in the current rate (from 20% to 25%), and a decrease (from 20% to 15%), and <br />different affordability mixes. For rental projects, the study looked at an increase <br />from 15% to 20%, and retaining the existing 15% rate, both with different <br />affordability mixes. <br /> <br />• With respect to the IZO, the current 20% inclusionary requirement for single- <br />family/for-sale projects results in development costs that are prohibitively high in <br />all scenarios analyzed. For rental housing/multi-family projects, the current <br />market and development economics is challenging, even under existing fees and <br />rates. Therefore, the study does not support an increase to the current 15% <br />inclusionary rates for either for-sale or rental projects. As such, it is a <br />recommendation of the study to equalize the inclusionary rate across both for- <br />sale and rental projects to 15%, (i.e., decreasing the inclusionary rate for for-sale <br />projects), but to increase the in-lieu housing fee for single-family and for-sale <br />projects to the extent feasible. <br /> <br />• To encourage on-site construction of affordable inclusionary units, it is best <br />practice to establish an in-lieu fee rate that is at, or close to, the cost to build the <br />on-site units as doing so greatly reduces the developer’s incentive to “fee out” of <br />on-site requirements, and means that when fees are collected, they provide more <br />effective mitigation. The analysis indicates there is an opportunity to increase the <br /> <br />1 It is the tenure of units (for-sale vs. rental) that most strongly influences the development economics and feasibility <br />of projects, rather than unit type, and so EPS’ analysis is structured accordingly. For the purpose of the study, EPS <br />analyzed three types of for-sale development (single-family detached, townhome, and condominiums), and two <br />common types of multi-family rental product – apartment units in either a “wrap” style or “podium” style building.