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Page 9 of 12 furthering affordable housing and the ability to provide housing affordable to all segments of the community through payment of the fee, versus requiring construction of the units on-site.” The affordable housing in-lieu fee amount was recently established by City Council as part of the broader impact fee update, and will escalate annually by the Construction Cost Index. The City must use collected affordable housing fees to implement the City’s housing element and other City policies and programs specifically related to affordable housing. The applicant’s preferred plan includes 597 total market-rate units, and under the City’s inclusionary zoning ordinance the developer is required to construct 89 inclusionary units (15 percent of 597). As an alternative means of compliance, the City could allow the developer to pay the affordable housing fee. The City’s affordable housing fee is currently $42.21 per square foot of single-family (detached and attached) homes. Using expected unit sizes provided by the applicant, staff calculates the affordable housing fee for the entire project to be approximately $52 million. This number would be adjusted if the project proposed to partially mitigate its impact on-site, and partially through payment of fees. The applicant’s preferred plan would construct all inclusionary units on-site. The plan includes 100 affordable multifamily rental apartments clustered in three buildings within a 3-acre portion of the site. Unit sizes range from 600 to 1,060 square feet with one-, two- and three-bedroom options. The affordable housing area is located adjacent to El Charro Road and a new internal street; it also abuts the age-restricted single-family homes and a park to the west and south. Additionally, the applicant notes that a tax-credit funded project would be required to provide some dedicated on-site amenities and open space for residents. Staff requests feedback on whether the City Council supports the applicant’s preferred plan to cluster the 100 affordable multifamily apartments in one area. As noted above, the IZO states a preference to disperse inclusionary units throughout the project so as not to concentrate these units in one area of the project. However, the IZO does allow a tax credit- funded apartment project to consist entirely of clustered units. Because the East Lakes project would be a PUD, the City has the ability to determine the preferred approach to clustering and could request or require the units to be more dispersed. As noted, if the affordable units are clustered multi-family apartments, they will be rental units. A further consideration is whether the City Council would like to see some affordable ownership opportunities created within the East Lake project. This would reduce the number of affordable rental units and replace these with owner-occupied affordable units. The applicant has noted that if the affordable multifamily apartment comprises fewer than 70 units, it may not be competitive for tax credit financing or feasible to construct. Staff requests City Council feedback on the applicant’s preferred plan to construct all inclusionary units on site. At the February 18, 2025, meeting a City Council majority supported allowing for a portion of the project’s inclusionary housing requirement to be satisfied through the payment of fees. One member of the City Council suggested that project fees could be used to construct affordable units in an alternative location closer to transit and services. Accepting payment of fees in lieu of on-site construction would require the City Council to find that “Greater benefit would accrue to the City with respect to furthering affordable housing and the ability to provide housing affordable to all segments of the Page 332 of 348