CITY COUNCIL AGENDA PACKET WORKSHOP

15 of 19 approximately $142,200 with a 25% inclusionary rate. For condominiums, this value ranges from approximately $122,400 per unit (current inclusionary rate and mix), to $140,177 at a 25% rate; reducing the inclusionary rate to 15% lowers the cost to about $91,800 per unit. As noted above, because the costs and equivalent in-lieu fees are so substantial for for- sale projects under even the current 20% inclusionary rate, EPS modeled an alternative scenario that would set the inclusionary rate for ownership single-family homes, townhomes, and condos at the same 15% rate as rental multi-family units (Scenario 1). While still substantial, reducing the inclusionary rate would allow the in-lieu fee to be set closer to the actual cost of providing the units, encouraging more projects to build on site and potentially yielding more inclusionary units.5 Rental Projects: Table 14 summarizes the hypothetical in-lieu fee rate per project, for rental projects under each inclusionary scenario, and for two different multi-family product types – a wrap-style building (comprising units “wrapped” around a central parking core), and a podium style building (units built on top of parking deck(s)), with the latter being somewhat more expensive to construct. Table 14: Maximum In-Lieu Fee - Rental Existing In- Lieu Fee Max. Fee Based on Existing Requirements Scenario 1 (15%) Scenario 2 (20%) Scenario 3 (20%) Multi-Family Apartment (Wrap) $51,077 $46,802 $52,872 $54,969 $53,207 Multi-Family Apartment (Podium) $51,077 $54,480 $62,468 $64,565 $60,405 The difference in hypothetical rate under any of the three scenarios modeled ranges from $46,802 (wrap) to $54,480 (podium) under the current inclusionary rate and affordability mix, to between $54,969 (wrap) to $64,565 (podium) under Scenario 2. Scenario 3 also reflects a 20% affordable rate, but with a slightly less deep affordability mix, so a lower resultant cost. Compared to the existing multi-family in-lieu fee of $51,077 per unit, these increases are much more modest, in part because the difference between affordable and market-rate rents is less pronounced as compared to for-sale units (i.e., the degree of subsidy is lower), and because the subsidy for the affordable units is typically spread among a larger total number of units in the project. However, as described in more detail below, multi-family residential / rental development is financially challenged in the current 5 It is noted that most attached units, whether for-sale or rental, and whether apartments, condominiums or townhomes are constructed as multiple units on a single parcel of land. In other words, many for-sale townhome projects are already subject to a 15% inclusionary rate, so the policy shift is less significant than it may appear to be at first glance.