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To: Date:
MOV 11$8 2015
NOV 2015
THE COUNCIL
From:
THE MAYOR
y 7,
Ana Guerrero
Guerrero
ERIC GARCETT
Mayor
S
a.g'- &.
W
P
Irf Los
Los Angeles
HOUSING+COMMUNITY
HOUSING + COMMUNITY Eric Gametti,
Eric Garcetti, Mayor
Mayor
Investment Department
Investment Department D. Cervantes, General
Rushmore D. General Manager
Manager
Planning &
Strategic Planning & Policy
Policy Division
Division
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November 17,
17, 2015
13-1389
Council Files: 13-1389
13- 1624
13-1624
14-
14-0361 0361
14-0600-S123
14-0600-S123
Council District(s): All
Contact Person(s):
(213) 808-8405
Rushmore Cervantes (213) 808-8405
Edwin Gipson (213) 808-8597
Monterrosa (213)
Claudia Monterrosa (213) 808-8650
808-8650
Attn:
Attn: Mandy
Mandy Morales,
Morales, Legislative
Legislative Coordinator
SUMMARY
In response to the worsening housing affordability crisis in Los Los Angeles,
Angeles, six of Los
Los Angeles City Council
Angeles' City
members, Gilbert
members, Gilbert Cedillo,
Cedillo, Mitch
Mitch OFarrell, Fuentes, Curren Price, Bob Blumenfield
O'Farrell, Felipe Fuentes, Blumenfield and
and Mike
Mike
Bonin representing both high income and very low income areas of of the City, put forth Motions requesting
report to
a report to analyze
analyze and
and identify
identify potential
potential local
local permanent
permanent funding
funding sources
sources for
for affordable
affordable housing
housing
financing, including a voter-approved bond measure, a fee on new development and earmarking a percent
incremental annual
of the incremental annual property
property tax
tax revenue
revenue among
amongothers. Councils
others. On October 8, 2014, the City Council's
Housing Committee
Housing Committee reconstituted
reconstitutedthe
the various
various Motions
Motionscalling
callingfor
for the Angeles Housing
the Los Angeles Housing and
and
Community Investment
Community InvestmentDepartment
Department(HCIDLA)
(HCIDLA) to toissue
issuea areport
report with
with aa comprehensive
comprehensive set of
set of
recommendations that
recommendations that addresses
addresses all
all of the Motions (Council
(Council file numbers 14-0600-S123,
14-0600-S123, 14-0361,
14-0361, 13-
13
1389, and 13-1624).
1389,
After researching
After researching various
various local
local and non-local funding
and non-local funding options
options for local affordable
for a local affordable housing
housing fund,
fund,
including a survey of
of tools used by other cities, HCIDLA through this report, presents a recommendation
for a local permanent funding source through an Affordable Housing Benefit Fee program. The The proposed
An Equal Opportunity/
Opportunity / Affirmative
Affirmative Action Employer
New Affordable Housing Benefit Fee Study
Page 2
program would establish a one-time monetary charge levied on new developments to assist the City
City with
financing affordable housing activities.
HCIDLA is recommending an Affordable Housing Benefit Fee over other potential tools described
described in this
transmittal based on an extensive review of
of other cities throughout the country, which compared one-time
versus
versus long-term,
long-term, sustainable
sustainablerevenue
revenuegenerating
generatingmethods.
methods. Of the
the various
various methods
methods reviewed,
reviewed, the
the
utilization
utilization of an Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee has
has been
been the most viable
viable and
and consistent
consistent method
method of
generating a permanent funding source.
source. While
While other
other options
options may
may generate
generate larger
larger funding, such
such as
as a bond
measure, these funds are short-term solutions with finite funding.
HCIDLA recommends pursuing an Affordable Housing Benefit Fee while concurrently examining and/or
implementing other large-scale affordable housing initiatives in the near future such as new preservation
and rehabilitation loans, the creation of a new Housing Finance Agency, and the potential for supporting
supporting
new Community
Community Revitalization
Revitalization and Investment
Investment Authorities
Authorities and/or
and/or Enhanced
Enhanced Infrastructure
Infrastructure Finance
Finance
Districts.
In 2011,
2011, the
the City's
Citys Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee study
study found
found aa close
close correlation
correlation between
between new
new
development and housing demand. Since that study was published four years ago, HCIDLA recommends
a new study that reflects the City's
Citys current
current economic
economic environment.
environment. The new studystudy should
should examine
examine any
potential fee in the context of
of other impact fees imposed on new development.
RECOMMENDATIONS
The General Manager of of the Los
Los Angeles
Angeles Housing
Housing and
and Community
Community Investment
Investment Department
Department (HCIDLA)
(HCIDLA)
respectfully requests that:
I. Your
I. Your office
office schedule
schedule this
this transmittal
transmittal at the
the next
next meeting(s)
meeting(s) of
of the
the appropriate
appropriate City
City Council
Council
committee(s) and forward it to the City Council for review and approval immediately thereafter;
A. INSTRUCT
A. INSTRUCT the the City
City Administrative
Administrative Officer
Officer to
to identify
identify the
the source
source of funding
funding for up to
$500,000 for the Department of City Planning, in close coordination with the Los Angeles
Housing
Housing andand Community
Community Investment
InvestmentDepartment,
Department,totoexecute
executeaa contract
contract for
for the
the
development ofof a new Affordable Housing Benefit Fee study and to effectuate the transfer
of funds to the Department of City Planning in the next Financial Status Report.
of
B. AUTHORIZE
B. AUTHORIZE the the General
General Manager,
Manager, HCIDLA,
HCIDLA, or or designee
designee to
to prepare
prepare Controller
Controller
instructions
instructions and
and make any necessary technical
technical adjustments
adjustments consistent with Council
Council and
and
Affordable Housing Benefit Fee Study
New Affordable
Page 3
BACKGROUND
A Transforming and Expensive City
The severe lack of affordable housing is a pervasive
pervasive problem
problem facing
facing the
the majority
majority ofof City
City residents.
residents. Today,
working-class and middle-class
working-class and middle-class Angelenos,
Angelenos, both
both renters
renters and owners,
owners, in Los Angeles face high housing
costs.
costs. The
The significant
significant urban
urban renewal
renewal taking
taking place in many
many ofof the
the city's
citys traditional
traditional lower
lower income
income and
and
diverse
diverse neighborhoods
neighborhoods isis further
further exacerbating
exacerbating the the high
high housing
housing costs.
costs. Recently
Recentlytransformed
transformed
neighborhoods like Venice
neighborhoods like Venice Beach,
Beach, Silver Lake
Lake and Echo
Echo Park have become expensive areas to live and
out of reach for most Angelenos.
Angelenos. Already
Already new
new urban
urban renewal
renewal pressures
pressures are
are being
being felt
felt in
in long
long neglected,
neglected,
typically poor, areas of
of the east and south regions of
of the City such as the Figueroa Corridor, Leimert Park,
Highland Park, Boyle Heights
Heights and Westlake
Westlake among
among others.
others. This
This ongoing
ongoing transformation in in many of
of Los
Angeles'
Angeles older
older established
established neighborhoods
neighborhoods maymay be
be a positive change
change for commercial
commercial corridors
corridors and for
homeowners whose increased
homeowners whose increased property
property values
values are
are aa welcomed
welcomed asset.
asset. However,
However, revitalization
revitalization can alsoalso
have a devastating impact for low-income renters who are least able to withstand increasing housing costs.
Much
Much of this urban
urban renewal
renewal comes comes onon the
the heels
heels ofofan
anunprecedented
unprecedented $40 $40 billion
billion government
government funded
funded
transportation expansion in the region and the added value has invited much needed investment, but also
speculators to "fix
fix and flip"
flip properties that in turn contribute to increasing housing costs in the surrounding
areas. The
The City
City is
is challenged
challenged to to encourage
encourage revitalization and investment while simultaneously promoting
neighborhood stability. ItIt is
neighborhood stability. is aa timely
timely moment
moment for
for the
the City
City to
to seize
seize the
the opportunity
opportunity and
and reap
reap the benefits
benefits
from this revitalization to help create a more equitable and sustainable housing market with more choices.
On the homeownership front, Los Angeles is the second-least affordable region in the country for middle-
class people seeking to buy a homes.
home5. The
The median
median priced
priced home of
of $560,0006 in Los Angeles is more than
two-and-a-half
two-and-a-half times
times the
the average
average national
national home
home price
price ($208,900)7.
($208,900). Such
Such high home
home prices require
require a
conventional monthly mortgage payment of of $3,146 with corresponding annual earnings that are upwards
of
of $125,000.
5 HarvardUniversity's
'Harvard University's Joint
Joint Center
Center for
for Housing
Housing Studies
'Data
6 DataQuick
QuickCalifornia
CaliforniaHome
HomeSale
SaleActivity
Activityby
by City
City -- 2014
2014 City
City Chart
77 United States Federal Reserve Bank.
Bank. Median
Median Sales
Sales Price
Price of
of Existing Single-Family Homes. 2014
Fee Study
New Affordable Housing Benefit Fee
Page 5
High Housing
Cities with High Housing Costs: Local
Local Affordable
Affordable Housing
Commitment
$806.5
$806.5 in Millions)
(Numbers in Millions)
2014-2015
2014 - 2015
200
$145.5
$145.5
$121.2
$121.2
100
100 $79.0
$79.0
$58.6
$58.6
$33.8
$33.8
$16.5
$16.5 $20.0 $20.9
$20.9
$4.2
$4.2 $4.2
$4.2 $1.3
$1.3 r, $4.5
$4.5 $0.0
00
New York San Francisco Chicago Washington, Seattle Boston Los Angeles
Los Angeles
D.C.
LOCAL HOME
LOCAL HOME
Los Angeles'
Los Angeles reliance
reliance on on diminishing
diminishing federal
federal resources
resources will cause aa dramatic
will cause dramatic decrease
decrease inin housing
housing
production. At
production. At its
its height,
height, inin2008,
2008,the theAffordable
Affordable Housing
Housing Trust
Trust Fund
Fund (AHTF)
(AHTF) allocation
allocation was $108
$108
Today, the
million. Today, the total
total funding
funding isis approximately
approximately $27$27 million,
million, all
all of
ofwhich are federal funds and program
income. The
income. The rising
rising housing
housing costs
costs and
and shrinking
shrinking public
public funds
funds are
are prompting many cities to implement or
reinvigorate their own local funding resources such as housing linkage fee programs or levies to help fund
local trust funds
funds and other affordable housinghousing programs. The affordable
programs. The affordable housing challenge is universally
shared by the cities highlighted above and all, all, but the City of
of Los Angeles, are
are responding with locally
created solutions.
Affordable Housing Benefit Fee: A linkage linkage fee
fee for
for all
all new
new development.
development. This requires
approval of
of the City Council and the Mayor to enact through a local ordinance.
Housing Bond Measure: A bond measure to approve new property tax revenues for affordable
housing. This
housing. This requires
requires aa ballot
ballot measure
measure with a two-thirds vote.
Housing
Housing Levy:
Levy: A citywide tax that authorizes
authorizes additional
additional regular
regular property
property taxes
taxes to
to be used for
affordable housing. This requires
housing. This requires aa ballot
ballot measure with a two-thirds vote.
Benefit Fee Study
New Affordable Housing Benefit
Page 6
Enhanced
Enhanced Infrastructure
Infrastructure Financing
Financing District (EIFD): A financing
District (EIFD): financing authority for cities
authority for cities to
to
construct and rehabilitate infrastructure, including affordable housing, by capturing local property
tax growth
growth within
within a districts boundaries. New
district's boundaries. New districts
districts are
are adopted
adopted by resolution.
Community Revitalization and Investment Authority (Authority): A financing authority for
cities to construct and rehabilitate infrastructure
infrastaicture by capturing local property tax growth within an
authoritys boundaries, it requires a 25 percent set-aside
authority's set-aside for affordable
affordable housing. New authorities
housing. New authorities
are adopted by resolution
Former
Former Tax Increment Set-Aside:
Set-Aside: Permanently
Permanently earmarking
earmarking aa percent
percent of the former
fonner CRA tax
revenue to the Affordable
Affordable Housing Trust Fund. approval of
Fund. This requires approval ofthe City
City Council and the
Mayor to enact a permanent allocation from the General Fund. Fund. However, this funding is currently
absorbed in the General Fund and pays for a variety of City services.
Fees on Real Estate Recording Instruments: Similar to Assemblymember Atkins Atkins' AB1335 bill,
Los Angeles County could impose a new document recording fee on real estate transactions. Any
potential effort to impose fees on real estate transactions at the local level should be considered in
context with ongoing statewide initiatives.
Per this transmittal, HCIDLA seeks to initiate a new nexus study to reflect current economic and housing
reflect current
market conditions. The new
conditions. The new study
study is
is critical
critical for
for designing
designing a linkage fee program that minimizes negative
impacts to the development community while still providing significant resources to help the City finance
affordable housing opportunities.
New Affordable Housing Benefit Fee Study
Page 7
Bond Measure
A Citywide bond measure
measure isis another option for
for creating
creating aa local
local affordable
affordable housing
housing fund.
fund. The recent past
shows City residents strongly support a local bond to fund affordable housing. However despite this strong
support, in 2006, during the housing bubble peak,
peak, the
the Citys
City's affordable housing bond, Measure
Measure H, failed
small margin
to pass by a small margin with 6363 percent
percent voting
voting in
in favor
favor and
and 37
37 percent
percent voting
voting against
against the
the proposed
proposed
housing bond.
bond. The
The$1$1billion
billionbond
bondmeasure
measurewould
would have
have resulted
resulted in
in an
an average
average annual
annual city
city debt
debt service
service
payment of approximately $58 million per year for 30 years.
Some challenges
challenges inin creating
creating a bond measure include
include an extensive
extensive and expensive campaign
campaign as as well
well as
added debt.
debt. This
This type
type of
ofbond
bond must
must be
be repaid
repaid byby the
the City
City of
ofLos
Los Angeles
Angeles from
from additional
additional property
property tax
revenues based upon the assessed value of of all taxable property, creating more City debt and competition
competition
for other City services
services funded
funded through
through a ballot
ballot measure.
measure. Additionally, a ballot measure
measure of
of this sort requires
a two-thirds vote of qualified electors in the City.
Housing Levy
Another option
option explored
explored for establishing
establishing a local source of funding for affordable
affordable housing includes
includes the
implementation of a citywide tax levy that authorizes additional regular property taxes to be dedicated to
affordable housing.
housing. A A housing
housing tax
tax levy
levy would
would require
require a ballot initiative with a majority- two-thirds- voter
approval. The
The levy
levy could
could be
be set
set for
for aa limited
limited time
time period and may be re-authorized by by voters.
While specific
specific affordable housing set-asides
affordable housing set-asides are
are not required
required of EIFDs, cities may
may identify
identify affordable
affordable
housing as a goal for an
an EIFD
EIFD targeted area.
area. EIFDs
EIFDs may
may invite
invite other
other local
local taxing
taxing entities
entities to
to join; limited
participation may diminish
participation may diminish the
the potential revenue
revenue sources. Where community
sources. Where community opposition
opposition to to an EIFD is
strong there may
strong there may bebe a tendency to push
tendency to push the
the location of a district
location of district out of core
core areas
areas in
in the
the City
City where
where
affordable housing is most needed.
Community Revitalization
Revitalization and Investment Authority (Authority)
In 2015,
2015, The
The Governor
Governor signed
signed AB2
AB2 (Alejo)
(Alejo) creating
creating aaCommunity
Community Revitalization
Revitalization and
and Investment
Investment
Authority that diverts
Authority that diverts tax
tax increment
increment (of
(of consenting
consenting local
local agencies)
agencies) to
to infrastructure
infrastructure projects
projects in
in
Study
New Affordable Housing Benefit Fee Study-
Page 8
disadvantaged communities, it requires a 25 percent set-aside for affordable housing. New authorities are
adopted by resolution.
Community Revitalization and Investment Authorities may invite other local taxing entities to to join except
for the LA
LA Unified
Unified School
School District;
District; limited
limited participation
participation may diminish
diminish the
the potential
potential revenue
revenue sources.
sources.
Where community
community opposition
opposition to
to an
an Authority is strong there
is strong there may
may be a tendency to push the location of
the Authority out of core areas in the City where affordable housing is most needed.
Making a Trust Fund allocation means that a portion of of the former redevelopment funds are not available
for alternate uses.
uses. Currently,
Currently, this
this revenue
revenue isis funding
funding aa variety
variety of
of other
other critical City
City services
services as
as part of
of the
General Fund.
Fund. The Mayor has recently committed to contributing $10 million from the General General Fund to
the Affordable Housing Trust Fund in future annual budgets, which is 60 to 80 percent of of what the CF14-
0361 motion would have achieved.
0361
FEDERAL,
FEDERAL. STATE AND OTHER FUNDING SOURCES
New affordable housing funding streams from Sacramento and Washington D.C. epitomize the magnitude
of the problem
problem and
and the
the urgency
urgency toto address
address this
this crisis.
crisis. This new funding has limitations
limitations however.
however. These
These
sources
sources are competitively awarded and
competitively awarded and the
the City ofof Los
Los Angeles is not guaranteed
guaranteed aa minimum
minimum funding
funding
level, and many require
require a local
local match,
match. Further,
Further, without
without aa local
local commitment,
commitment, City City projects are
are unable to
leverage these outside sources
sources competitively.
competitively. Other
Other funds
funds are
are highly
highly restrictive
restrictive and
and may
may only
only be used for
very specific
specific populations,
populations, limiting
limiting the
the Citys
City's ability to use the dollars where the local local need
need is
is greatest.
greatest.
Below is a snapshot of said funding streams.
streams. With
With thethe exception
exception of
ofthe
the National
National Housing
Housing Trust
Trust Fund,
Fund,
expected to distribute funding in 2016, all other sources are available beginning in 2015.
New Affordable Housing Benefit Fee Study
Page 9
appropriations process or
Relying solely on these outside funds makes the City vulnerable to an annual appropriations
competitive criteria that may not necessarily include the local long-term public policy priorities.
of the proceeds from cap-and-trade funds the newly created AHSC program that is tasked with
A portion of
reducing greenhouse gases
gases by encouraging the development
development of affordable housing near transit to create
create
fewer car trips and vehicle miles
miles travelled.
travelled. The
The AHSC program will receive 20 percent ofof the annual cap-
and-trade auction revenues projected to be approximately $2.2 billion which translates to $400 million for
Housing Benefit Fee Study
New Affordable Housing
Page 10
States 2015-2016
the State's 2015-2016 fiscal
fiscal year
year budget. The funding
budget. The funding isis competitive
competitive and
and requires
requires aa local
local financing
financing
commitment.
Californias Veterans
California's Veterans Housing and Homelessness Prevention (VHHP) Program (Proposition 41)
voters approved
In 2008, California voters approved Proposition 12, the
Proposition 12, the Veterans
Veteran's Bond Act of of 2008,
2008, authorizing
authorizing $900
million in general obligation bonds intended to help veterans purchase homes through the CalVet
Cal Vet Home
Loan Program.
Program. As
As a result of the nations economic crisis and the state's
nation's economic states housing
housing downturn,
downturn, the CalVet
Cal Vet
Home Loan Program did not experience the demand that was originally projected before the downturn.
METRO Motion
In the summer of 2015, the LosLos Angeles
Angeles Metropolitan
Metropolitan Transportation Authority (MTA) approved a Mayor
Garcetti led Motion that directs the MTA to set a 35 35 percent
percent affordable housing goal of all residential units
developed on
developed on MTA-owned
MTA-owned property. The Motion
property. The Motion further
further directs the MTA
MTA to create
create aa Transit-Oriented
Transit-Oriented
Affordable Housing Fund (TOAH)
(TOAH) with
with an initial dedication
dedication of $2
$2 million
million each
each year for five years for a
million maximum.
$10 million However, other
maximum. However, other provisions
provisions include
include a price
price reduction
reduction on MTA-owned
MTA-owned land for
affordable housing
affordable housing projects
projects as well as the establishment
establishment of a memorandum of of understanding with local
local
jurisdictions
jurisdictions for
for joint
joint development
development projects. Additionally, this
projects. Additionally, this TOAH fund will likely
likely bebe acquisition
acquisition
financing that
that does
does not include
include the
the capital
capital leveraging
leveraging sources. This significant
sources. This significant policy shift
shift underscores
underscores
the need to address the affordable housing crisis and to better serve a primarily low-income ridership.
8 "Veteran"
8
M Veteran means any
any person who served in the active military, naval or air service of the United States or as a
member of of the National guard who was called to and released from active duty or active services for a period of
not less than 90 consecutive days or was discharged from service due to a service related disability. This includes
veterans with other-than-honorable discharges.
Benefit Fee
New Affordable Housing Benefit Fee Study
Page 11
11
Speaker Atkins
Atkins' Housing Bills Package
Speaker Atkins
Atkins' proposed
proposed bills
bills (AB
(AB 1335,
1335, ABAB 35,
35, AB 90, and AB 1056) 1056) were a comprehensive approach
to increasing the availability of affordable housing
housing statewide.
statewide. The
The bills proposed
proposed to establish a permanent
affordable housing funding
affordable housing funding source
source through
through aa $75
$75 fee
fee on real estate transaction documents
documents with
with a cap
cap of
$225 per parcel (AB 1335), increase the states
state's Low Income Housing Tax Credit by $300 million thereby
enabling a $200 million leverage in 4 percent
percent federal
federal credits
credits that
that are
are currently
currently underutilized
underutilized (AB35), create
a framework
framework for how California will spend the NHTF funds mentioned above above (AB
(AB 90) and dedicate a
portion
portion of the Proposition
Proposition 47 funds
funds to
to reduce
reduce recidivism
recidivism by investing
investing inin rapid
rapid rehousing
rehousing and
and support
support
systems
systems for formerly incarcerated
incarcerated Californians
Californians (AB (AB 1056).
1056). Governor
Governor Brown
Brown vetoed AB35 citing future
financial uncertainties regarding the States
State's budget and signed both AB AB 90
90 and AB
AB 1056.
1056. Meanwhile, the
California State Legislature made AB 1335 1335 a two-year bill that may be advanced in 2016.
DEPARTMENT RECOMMENDATION
Based on the review of
of possible local funding programs, new state resources and a survey of other cities
with similar housing challenges, the HCIDLA recommends the Affordable Housing Benefit Benefit Fee as a local
economic tool to serve as the City's
economic tool Citys first
first dedication
dedication of
oflocal
local and
and permanent
permanent affordable
affordable housing funding.
funding.
HCIDLA further recommends to jointly work with the Department of of City Planning on the administration
of
of the new study.
The Affordable Housing Benefit Fee program is designed to offset a portion of of the future impacts on the
City's
Citys affordable
affordable housing and it is is not
not considered
considered an in-lieu fee oror payment required in-lieu of of building
low-income housing
housing units.
units. Nexus
Nexus studies
studies quantify
quantify the maximum justifiable linkage fee a City may levy.
However, jurisdictions
jurisdictions do not typically adopt fees at the maximum level since they must strive to achieve
a balance between a fee that is
balance between is aasignificant
significant contributor
contributor to new
new affordable
affordable housing
housing and
and still
still promotes
promotes
economic activity through continued development
development activity.
activity. Failure to pay the fee exacerbates the housing
crisis and affects local businesses in the form of loss demand for goods and services.
Affordable
New A Benefit Fee Study
ffordable Housing Benefit
Page 12
Missed Opportunity
During the housing boom and the recent growth in overall construction activity, the City of of Los
Los Angeles
missed a tremendous opportunity to increase the affordable housing stock through an Affordable Housing
Benefit Fee
Fee program.
program. IfIfan
an affordable
affordable housing
housing benefit
benefit fee,
fee, even
even at
at the
the lowest
lowest level
level studied
studied in in 2011, were
implemented
implemented in in 2011,
2011, the
the AHTF
AHTF would have received
would have received an average
average of
of $37
$37 million
million in in annual
annual revenue,
revenue,
enabling the
the City to
to finance 370 affordable
affordable housing
housing units
units every
every year.
year. At
At this
this rate,
rate, aa linkage
linkage fee
fee program
program
would double the amount of of affordable housing the City can finance from 367 with current federal funds
to over 700
700 units
units annually with linkage fee proceeds included.
included. The losses are magnified when we consider
the leveraged dollars that are missed when the City does not invest in affordable housing.
Self-Sustaining City
An overdependence on short-term state and federal funds funds hampers
hampers the Citys
City's ability
ability to create
create long-term,
long-term,
innovative housingpolicies.
innovative housing policies. The
The Affordable
Affordable Housing
Housing Benefit
Benefit Fee grants the City City the
the autonomy
autonomy andand
flexibility to develop
flexibility to develop housing
housing policy
policy objectives
objectivesand andnewnew financing
financingtools
tools that
that are
are based
based onon a local
local
understanding
understanding of of the
the problem.
problem. With
With aa benefit
benefit fee,
fee, the
the City
City would
would have
have the
the distinct
distinct opportunity
opportunity to use
funds in areas that do not qualify for other state and federal dollars because of of strict
strict regulations, such as
locating housing within a one half mile of light light or
or heavy
heavy rail.
rail. Similarly, the City could help middle income
households
households whowho dodo not qualify
qualify for
for low-income
low-income housing
housing assistance
assistance financed
financed by federal
federal resources
resources but
nevertheless
nevertheless struggle to to find market rate rents
rents they can
can afford.
afford. These
These households
households fallfall into
into what is known
as the "donut hole" earning too much to qualify for existing program but not enough to afford market rate
donut hole
costs. These
These type
type ofofflexible
flexible uses
uses only
only come
come with
with aa locally
locally generated funding stream.
The City ofof Mountain View
View more than doubled
doubled the existing impact fee program of of $10.26
$10.26 per
square foot to $25 per square
square square foot
foot for
for office
office space
space and
and $17
$17 per square
square foot
foot for
for new
new apartment
apartment
projects,
projects, These
These fee
fee increases
increases are
are well
well above
above the
the staff
staff recommendation
recommendation of of $15
$15 per square
sauare foot of
apartment space and $20 per square foot of of office space.
In San
San Mateo
Mateo County,
County, thirteen
thirteen cities
cities partnered
partneredtoto explore
explorethe
the use
use of impact
impact fees
fees on
on new
new
development to fund affordable housing. This This multicity
multicity project will simultaneously
simultaneously produce nexus
studies for several jurisdictions in the county; the results are expected in 2015.
Social Contract
An
An Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee program
program calls
calls for the
the development
development community
community to embrace
embrace the
the
responsibility of
responsibility of financing
financing a supply of of affordable
affordable housing
housing forfor the
the growing
growing low-and
low-and moderate-income
moderate-income
workforce that isis employed.
workforce that employed. GivenGiventhe
thehigh
highpropensity
propensity for
for developers
developers toto profit
profit from
from Los
Los Angeles'
Angeles
popularity
popularity and
and standing
standing as as the third largest metropolitan
metropolitan economy
economy in in the
the world as well as the massive
massive
public
public investment
investment in in transportation
transportation infrastructure,
infrastructure,the
the fee
fee program
program isis aa fair and
and positive
positive step
step toward
toward
equitable growth that spreads economic opportunity to working households.
An Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee program
program relies
relies entirely
entirely on on the
the Citys
City's ability
ability to
to continue
continue attracting
attracting
development and its ability to encourage expansion within the City so continued job growth is critical for
the success of the program.
program. IfIfstructured
structured correctly,
correctly, the
the fee
fee program
program will help sustain
sustain job growth
growth and
and will
help
help pay
pay for
for the
the much
muchneeded
neededaffordable
affordable housing
housing of ofitsitsworkforce
workforcewhile
whilepromoting
promoting economic
economic
competitiveness. The
The slightly
slightlyhigher
higherdevelopment
development costs
costs expected
expected fromfrom a housing
housing linkage
linkage fee program are
offset by higher rents and sales prices in a high demand market like Los Angeles.
CONCLUSION
While housing linkage fees are not a panacea for cities with an affordable housing crisis, they do generate
millions
millions of dollars and help leverage additional funds that together make a significant
significant contribution to a
local
local fund.
fund. Of
Ofthe
thehigh
highcost
costcities
citiessurveyed
surveyed asas part
part of
ofthis
thisreport,
report, San
SanFrancisco
Francisco and
and Boston
Boston have
have
implemented housing linkage fees for several years.
years. Combined
Combined withwith other
other state, federal and private funds,
the housing linkage fee programs share the costs of new affordable housing demand over several funders,
not just developers.
developers. According
According toto the
the prior
prior 2011
2011 Affordable
Affordable Housing
Housing Benefit Fee study,
study, in cities
cities that
that
implement this
this type
type of fee program,
program, the linkage fees
fees account for approximately 20 to 25 percent of of the
local housing budget.
Support and need for a City Affordable Housing Benefit Fee program has been long established in
Los
Los Angeles
Angeles with
with Mayor
Mayor Tom
Tom Bradley
Bradley proposing
proposing the
the Citys
City's first
first linkage
linkage fee in 1990
1990 with
with an
an adopted
adopted
"notice
notice to credit"
credit ordinance
ordinance notifying developers
developers that
that they might be subject to an an Affordable
Affordable Housing
Housing
Mitigation
Mitigation Fee
Fee that
that the
the City
City was
was considering.
considering. Nearly a decade later, in 2000, the City's
Citys Housing
Housing Crisis
Crisis
Task Force issued a set ofof recommendations through the In Short Supply report calling for a linkage fee
as one of many City taxes
taxes to help finance
finance affordable
affordable housing.
housing. Today, fifteen
fifteen years later, the City faces a
more pronounced and complex housing shortage that demands the City to consider the establishment of of a
local permanent,
permanent, self-sustaining source
source of funding
funding that gives
gives the City flexibility to create new financing
tools to address the affordability crisis.
New Affordable Housing
New Affordable HousingBenefit
BenefitFee
Fee Study
Study
Page
Page 14
14
FISCAL IMPACT
The department is requesting up to $500,000 to be transferred to the Department of
of City Planning
Planning for
executing the contract for the new study.
Reviewed by:
by: Reviewed by:
f i
Approved by:
zAm
RUgHMORE
RUSHMORE D. D.
Uji
RVANTES^
Qer ANTE
p
General Manager *
1
Attachment 1
Los Angeles'
Los Angeles' Rent
Rent and Mortgage
Mortgage Affordability
Affordability Gaps
Los
Los Angeles'
Median
Income
Median
$160,000 Home
Price
$140,000 Income
$560,000
Needed to
Afford a
$120,000
Mortgage
$100,000
$100,000 Income
Needed to
$80,000 Afford Rent
$60,000
Income
$40,000 Needed to
Afford a
$20,000
$20,000 Built
Newly Built
Apt
$0 11 / 11 gl 111 or,
2007 2008
2007 2008 2009
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014
2014
Attachment22 -Linkage
Attachment -Linkage Fees
Fees in Select
Select California
California Cities (Per Square Foot)
Cities (Per
Warehouse/ Retail/ integrated
Integrated Small
City Hotels R&D Office Entertainment Residential
Industrial
Industrial Restaurant PDR Enterprise
Menlo Park
Menlo Park $15.19 $8.24
(2014)
Napa County
$9.00 $5.25 $3.60/$4.5D
$3.60/$4.50 $7.50 $5.50
(2015)
Palo Alto
$18.89 $18.89 $18.89 $18.89 $18.89
(2014)
Marin
Mann $1,745 per
$7.19 $7.19 $1.94/$3.74 $5.40
(2013) room
Mountain View
$25.00 $17.00
(2014)
San Francisco
$17.99 $16.01
$16.01 $24.03 $22.42 $22.42 $18.89 $18.89
(2015)
(2017)
San Diego (2017) $1.28 $0.80 $2.12 $1.28
(2014)
San Jose (2014) $17.00
(2014)
Daly City (2014) $25.00