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As part of its 2021-2022 Work Plan, the City Council identified an update to the City's Affordable Housing Fees as a "Priority B" project, meaning that the project should either be completed or a significant milestone accomplished by the second year of the work plan (i.e. 2022). Therefore, a first step would be for the City Council to evaluate whether fees should be increased closer to, or at, the maximum levels allowed by the 2018 study; and, potentially consider if the study should be more comprehensively updated. Staff notes that the prior update took approximately three years to complete, although was combined with an update of other City development impact fees, which added time and complexity to the process. In addition to the fee levels themselves, consideration could be given to other refinements or updates to the structure of the LIHF. For example, the current fee aggregates all "Industrial" uses into a single category, where, in practice, the PMC's definition of Industrial encompasses a broad range of uses, from relatively intensive uses like Research and Development (R&D) and specialist manufacturing, to much lower -intensity uses such as warehousing. Although the PMC allows for a developer to propose a lower fee rate, commensurate with actual employment densities for a given use, it may be beneficial to create a more fine-grained set of commercial land use categories that better align to the sorts of industrial uses that are seeking to establish in Pleasanton, and their respective employee densities. While the Work Plan identifies the review of the LIHF as a priority, staff notes that the COVID-19 pandemic has caused significant shifts and disruptions in the economy, particularly for commercial development, affecting both business locational decisions and aspects that contribute to the calculation of fees, such as construction costs for housing. As a result, a thoughtful approach to the timing and methodology for data collection will be important, to ensure that any anomalous market conditions are accounted for - it may also be beneficial to wait for these conditions to stabilize, before embarking on the comprehensive study, potentially during the first one to three years of the next Housing Element cycle if a decision is made to move forward with its preparation. Allocation and Expenditure of the LIHF The current policies in place regarding the LIHF allow the funds to be used for a variety of reasons, and in a relatively flexible manner, as outlined in this report and in Exhibit A. Some of the priorities established in City policies, that help to provide guidance to staff and City officials in making funding recommendations, and/or allocating incentives to projects (such as fee reductions or permit streamlining) include: - Projects that provide the greatest number of units at the greatest level of affordability. (Housing Element Program 11.1) - Projects that provide for long-term affordability for extremely low, very -low, low- income units (Housing Element Policy 14) - Projects involving partnerships between non-profit and for-profit housing developers that can potentially secure better funding and be more feasible to have Housing Element Update, P21-0751 Planning Commission 8 of 13