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3 of 11 Inclusionary Zoning Ordinance–Overview The IZO, codified as Chapter 17.44 of the Pleasanton Municipal Code, was adopted in 2000 and has not been updated or amended since then. Key elements of the current IZO include: • For projects of 15 or more units, a requirement to include affordable units at a rate of 15 percent of total units for multi-family projects; and 20 percent of total units for single- family projects. The IZO does not distinguish between rental and for-sale projects. • Inclusionary units within multi-family must be affordable to very low- or low- income households; within single-family projects, units can be affordable to very low-, low-, and/or moderate-income households. The IZO does not establish proportions of units that must be targeted to each of these affordability levels, nor does it specify a specific income limit within the very low-, low- or moderate-income range. • Commercial, office, and industrial development is required to either pay the Lower Income Housing Fee (LIHF) (also known as the affordable housing fee) or may provide affordable housing as part of the project. • Allowance for projects to propose a range of alternatives to building on -site units. These include payment of in-lieu fees, dedication of land, construction of units off-site, and other “creative concepts” deemed consistent with the purposes of the IZO. • For some alternatives, such as dedication of land and off -site construction, and other developer-proposed approaches, the IZO specifies the City Council must approve such approaches (i.e., it is discretionary as to whether such alternatives are allowed). W ith respect to payment of fees, the IZO is permissive, stating that applicants may propose payment of fees, with City Council approval not stipulated and no parameters for approval identified. The IZO includes some limited parameters for the location and design of the inclusionary units, generally prohibiting clustering the units in a single area of the site, requiring units to incorporate identical exterior materials and finishes as the market -rate units, and allowing for units to be smaller than the market-rate units without specifying a minimum unit size. Since its adoption, the IZO has resulted in the production of hundreds of below -market-rate units and generated millions of dollars in affordable housing funds that have supported valuable programs and unique affordable housing projects including Promenade Apartments, Kottinger Gardens, and the Sunflower Hill residential community. While flexibility and the ability to negotiate affordable housing agreements as a component of discretionary project approvals made the IZO’s structure logical when it was adopted, State laws have shifted to eliminate much of the City’s discretion and negotiating authority with respect to residential projects, and to allow enforcement of only objective standards and requirements. The lack of specificity in the current Ordinance doe s not serve the City well in ensuring market-rate projects contribute to meeting the City’s substantial affordable housing needs and its Regional Housing Needs Allocation (RHNA) obligation. Payment of In-Lieu Fee versus Building On-Site A particular critique of the existing IZO is that projects too often choose to “fee out” of their affordable housing requirements – i.e., pay the affordable housing fee, rather than build units on site. As noted, the current wording of the IZO’s alternative compliance provisions does not give the City discretion to reject a proposal to pay the in-lieu fee. However, an important factor