RES 2024077 - Laserfiche WebLink

Pleasanton Comprehensive Fee Update and Nexus Study November 2024 Housing Development Costs and Affordability Gap To calculate the maximum justifiable fee for each land use category, EPS estimated the "affordability gap" related to developing residential units affordable to very-low, low, and moderate-income households. The average household size in Pleasanton is 2.83 people per household according to 2022 Five-Year Estimates from the American Community Survey (ACS), but the average number of people, per working household (households with earnings - not including retired households, etc.) is 3.40. To estimate the development cost of a "typical" affordable unit, a development prototype is defined. In an effort to provide consistency between the Commercial Linkage Fee Study and the Inclusionary Housing In-Lieu Fee Study, EPS has relied on prototypes developed for the Inclusionary Housing analysis in this study as well. Since there was no three-person household prototype used in the Inclusionary Housing analysis, the Commercial Linkage Fee analysis uses an average affordability gap of two development prototypes to characterize the cost of a "typical" affordable unit. The first assumed prototype reflects multifamily construction at over 30 dwelling units to the acre with podium parking. Based on comparable recent projects, EPS assumes the typical gross square footage of a one-bedroom rental unit will be approximately 800 square feet. The second assumed prototype reflects single family townhome construction at 20 dwelling units to the acre, consistent with recent townhome production in Pleasanton. EPS assumes the typical gross square footage of a three-bedroom townhome unit will be 2,000 square feet. These assumptions are based on the average sizes of similar housing units recently constructed in Pleasanton and nearby jurisdictions. The multifamily prototype is assumed to be rental and the town home prototype is assumed to be for sale. The City of Pleasanton does not anticipate a significant amount of single family detached development, so it is less appropriate when estimating the"typical"affordable unit. Development Cost Assumptions Affordable housing development costs include land costs, direct costs (e.g., labor and materials), and indirect or"soft" costs (e.g., architecture, entitlement, marketing, etc.). Data from recent land transactions in and around Pleasanton have been combined with EPS's information from various market-rate and affordable housing developers in the surrounding region to estimate appropriate development cost assumptions for use in Pleasanton. A developer fee is also estimated and represents the compensation to the developer for their efforts, investment, and risk. These assumptions are shown on Table 19 and indicate that the total development cost per unit for rental apartments is about $595,000 and the total development cost per unit for for sale townhomes is about $1.07 million. By necessity, this figure represents a "prototypical" project; the actual costs for a given project will vary by location and project design characteristics. Revenue Assumptions Assumptions must be made regarding the applicable income level (very-low, low, and moderate) and the percentage of household income spent on housing costs to calculate the values of the affordable units. In addition, translating these assumptions into unit prices and values requires estimates of operating expenses and capitalization rates. Additional details about assumptions used to estimate unit prices and values can be found in Chapter 7. 32