Davis, CA – Back in July 2023, the city council adopted an ordinance which established at 15 percent affordable unit requirement for projects with more than seven units. On Tuesday, the council will be asked to approve a resolution adopting rental housing inclusionary guidelines.
On October 1, 2024, the council, for discretionary projects, directed city staff to return with “an option that allows the developer to make a proposal to the city, and to make a financial case for selecting the discretionary option by showing the city that the project is otherwise financially infeasible or financially challenged.”
City staff has now laid out proposed guidelines based on input from legal counsel about “providing legitimate alternatives for projects.”
The guidelines set a “per-unit in-lieu fee amount of $608,000,” staff writes. “This amount is based on the total cost to build an affordable unit in Davis, using the cost per unit from the most recent all-affordable project built in Davis.”
That amount falls below the $708,000 statewide average cost found by the Terner Center when looking at new construction for affordable units.
“As a fee, the City cannot charge more than the actual costs,” staff notes, adding, “This fee is intended to be adopted now and then updated with the City’s master fee schedule annually, with updates based on the California Construction Cost Increase each July 1. This will ensure the fee stays relevant to market costs and conditions.”
Second, the guidelines would require “that any fractional units necessary to reach 15% be paid in a proportional in-lieu fee.”
For projects that are “non-discretionary” — “the proposed guidelines require the developer to choose either an upfront in-lieu fee payment or enter into an agreement with the City to provide a multi-year payment over 10 years, using a net present value calculation.”
Staff acknowledges, “While receiving annual payments guarantees revenue for the Affordable Housing Fund each year, it will likely take many years until the available amount is sufficient to put toward a project.”
For discretionary projects, the staff has provided examples of “what the developer might provide for alternate compliance, including allowing the same in-lieu fee standards as the City would allow for non-discretionary projects.”
Staff acknowledges some legal risk in this approach.
Such an approach, staff writes, “may call into question the reasonableness of the 15% affordable housing requirement.” However, they add, “under State law the City is precluded from requiring more than 15% affordable housing unless it can be demonstrated as financially feasible by an independent analysis.”
Further, they note, there is “risk in not providing details of additional possible alternatives, such as land dedication, or off-site building of units.”
Staff adds, “The City set the rental housing inclusionary requirement of 15% by ordinance, but if the Council approves this resolution to allow for alternative compliance, future changes to alternative compliance may also be made via a Council resolution.”
Staff therefore recommends that council approve the proposed resolution and then review it in the future after implementation to determine if there need to be further adjustments.
$600,000 to build an affordable unit? No wonder there is a shortage.
And that’s below the state average.
Proof that the current system is broken.
Smash smash smash smash smash smash smash . . . still beating my head against the wall, trying to make this make sense. Blood everywhere, but it still doesn’t make sense.
Charge a fee, making the development more costly, thus raising prices . . . to make prices lower.
Just stop messing with everything and give up on manipulating the system to make things ‘affordable’. You are messing with reality. Stop. Just stop.
Markets do work. Let them.
That was my point. You know what doesn’t work? DISTRICTS