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Nexus-Based Affordable Housing Fee Analysis for Rental Housing Draft Report 02/26/18 This analysis evaluates the demand for affordable housing generated by a range of for-rent unit sizes. For each unit size, the demand-based nexus fee calculation involves the following steps: A. Market-Rate Household Income Levels. The expected rental price of the unit is based on market data regarding the actual asking rents of apartments of various sizes. The required income levels of households occupying new market-rate housing are derived based on the rental rate, assuming standard housing cost expenses as a proportion of overall household income. For example, a typical household renting a market-rate two- bedroom unit for around $2,700 per month would have an income of roughly $113,840, if they spent 30 percent of their income on housing costs (rent and utilities). B. Household Expenditures. Based on the household income computed in Step A, Consumer Expenditure Survey data is used to evaluate the typical spending patterns of the household. This analysis provides an estimate of how much the household spends on specific categories of expenditures, such as"Food at Home." As the households' income increases along with the price and size of the market-rate units, the total spending on goods and services also increases. The Consumer Expenditure Survey also indicates that these relationships are not linear (e.g., a household with twice the income does not necessarily spend twice as much on food). C. Job Creation and Worker Households. Having estimated the households' spending on various items, that spending is then converted into an estimation of jobs created. For each expenditure category, data regarding average worker wages and the ratio between gross business receipts and wages are used to translate these household expenditures into the total number of private-sector workers. For selected public-sector jobs that typically grow in proportion to the local population size (e.g., teachers), the demand for new workers is estimated by relating current levels of employment in such categories to the current population and applying this ratio to future development. Because each new worker does not represent an independent household (Pleasanton has an average of 1.67 workers per working household), the total number of new households created is somewhat less than the number of new jobs created. EPS has further adjusted the household formation rates to reflect the fact that a certain proportion of workers will not form their own households, particularly those of younger ages.1 D. Worker Households by Income Category. Each worker household generated is assigned to an income category—represented as a proportion of AMI ranging from 50 to 120 percent—based on its estimated gross wages. This provides the total number of households generated at each income level by construction of market-rate units at various sizes and price points. The results indicate that residents of smaller, lower-priced units generate fewer worker households requiring affordable housing than do residents of larger, higher-priced units. 1 BLS data indicates that 12.5% of retail/restaurant workers are age 16-19, but an average of only 1.9% of workers overall (this factor is applied to other industries). EPS has assumed that such young workers do not form their own households. Economic&Planning Systems,Inc. 4 P:\1510.0,\Sill IDleasantonPee\ReporryMordabk_nouslnR\151111reportOUPlerentaLEeIX