Davis, CA – For several years now, the city of Davis has worked to create inclusionary housing requirements for multifamily developments.
In 2023, the Social Services Commission reviewed and provided input to the City Council on the inclusionary requirements for multifamily housing prior to the City Council adopting the ordinance revisions.
On Tuesday, city staff will seek “broad policy input directly from the City Council, prior to finalizing the draft resolution called for by the ordinance.”
Staff is seeking feedback on two key issues.
First, the financial contributions—such as in-lieu fees or ongoing revenue streams.
Staff is asking, “Does the Council want to allow for in-lieu fees as an option for whole units (versus allowing in-lieu fees only for fractional unit requirements)? Secondly, does the Council want the in-lieu fee to represent the full cost of building a unit, the delta between the cost to build a unit and the typical funding available to build, or a different amount?”
The second question is on the vexing problem of vertical mixed-use projects.
Staff asks, “Does the Council wish to incentivize vertical mixed-use developments through the inclusionary requirements, or via other means?”
Back in July 2023, the Council adopted an ordinance that updated the multifamily inclusionary housing portion of the City’s affordable housing ordinance.
The updates require “15% of the units for multifamily projects with seven or more units to be affordable, with affordability levels split evenly between low income units and very low income units.”
According to city staff, “Alternate options provide developers with choices should they not want to provide the required number of affordable units on-site.
Some of the alternatives include land dedication, off-site development, or financial contributions to the city’s affordable housing fund.
For land dedication, “At the discretion of the City, a developer may make an irrevocable offer of dedication to the city of sufficient vacant land located within the city to meet the total affordable rental housing units required pursuant to this section.”
Staff is recommending that this option only be available for discretionary projects (projects where Council has discretion as opposed to non-discretionary projects under SB 330 or SB 35 where council will not have the ability to approve or reject affordable housing proposals).
This would allow Council to “refuse a parcel if it is deemed inappropriate to be a land dedication site.”
In addition, the developer may develop an off-site development as affordable housing.
They would be required to provide at least 15 percent inclusionary units “at an off-site location within the city, pursuant to the affordability requirements specified in the inclusionary housing ordinance. These off-site units would be available for occupancy at the same time as the first market rate units in the primary development.”
Just as was the case with the land dedication option, “Staff recommends that this option be available to discretionary projects only, so Council can refuse a proposal if it is deemed inappropriate. This option can be considered non-discretionary as an alternate option, but would need to have specific parameters clearly defined to ensure such a proposal meets expectations.”
Finally there is the option of financial contributions either in the form of in-lieu fees or “a regulatory agreement with the City to provide an ongoing revenue stream.”
Currently, The Celeste (3820 Chiles) is “the only project to have this arrangement, which requires they pay $100,000 per year or 2% of the gross rental income, whichever is greater.”
Previously, the City has “utilized in-lieu fees and other revenue streams as an option when a developer does not wish or is not able to provide the affordable units on-site.”
City staff wrote, “In-lieu fees allow the developer to pay the City an amount in-lieu of building an affordable unit. The City can determine what an in-lieu fee should represent and set the fee accordingly.”
Comparable cities:
- West Sacramento – $7,699 per unit charge.
- Berkeley – Fee per square foot of residential ranging from $38.75 for 5,000 square feet to $56.25 for more than 12,000 square feet. If the project had 50,000 square feet of residential, then the in lieu fee would be $2.8 million.
- East Palo Alto – $299,200 per rental unit.
- Hayward – Fee on habitable space between $19.39 and $26.05 per square foot. If a project had 50,000 square feet, the fee would be $969,500.
