CITY COUNCIL AGENDA PACKET WORKSHOP

12 of 19 Commercial Linkage Fee for Affordable Housing Table 10 provided below summarizes the estimated commercial linkage fee based on initial analysis. Unlike the in-lieu affordable housing fee (discussed in depth below), the Commercial Linkage fee uses a methodology that considers new demand for affordable housing generated by employment associated with commercial uses. Factors such as wage levels, employment densities, and the costs to provide housing at the affordability levels needed by those future employees are incorporated to arrive at the linkage fee. As shown in the table, the maximum is quite significant – this is not an unusual outcome in these types of studies, and most communities choose to discount commercial linkage fees, as the City Council opted to do as part of the 2018 update. Table 10: Commercial Linkage Fee – Estimated Fee Maximums 2024 Update – Maximum Allowable Current Fee Amount % Change Commercial (per sq. ft.) 412.97 5.38 7576% Lodging (per sq. ft) 41.19 3.71 1010% Office (per sq. ft) 75.51 8.98 741% Industrial (per sq. ft) 40.47 14.42 181% Analysis of Modifications to Inclusionary Housing Rate and In-Lieu Fee Estimates The City Council has expressed interest in various changes to the existing IZO including: • Modifying the existing inclusionary rate, potentially to increase it above the current rate of 15% inclusionary for multi-family projects, and 20% for for-sale projects. • Providing more specificity as to the affordability mix required among inclusionary units (i.e., the income levels at which units would be deed-restricted). • Increasing the Affordable Housing Fee that is charged in-lieu of building units on site (whether for small residential projects and commercial developments exempt from the on-site inclusionary requirement), or that request to opt out of building units on-site. All three of these changes have the potential to be more costly to new developments, whether reflected in more deed-restricted units required to be built on site, or an increased in-lieu fee. It is best practice, as well as a requirement of State law, to consider the effect of changes to the inclusionary program on project feasibility, and to ensure that the program does not have the unintended consequence of making market rate residential development financially infeasible. It is noted that Pleasanton’s IZO and inclusionary rates are structured around unit types (single-family and multi-family) versus tenure (for-sale or rental housing projects). Because tenure strongly influences the market-factors that relate to affordability, it is much more commonly used by cities in structuring their inclusionary programs. Among staff’s recommendations for revisions to the IZO, is to modify the ordinance to use tenure (rental vs. for-sale) rather than unit type for the purposes of determining the