SR-07-14-1998-8AF:IHOUSINGISHAREIWPFILESISTAFFRPT\INCLord1 stread.WPD JUL '
Council Meeting: July 14, 1998 Santa Monica, California
TO: Mayor and Members of the City Council
FROM: City Staff
SUBJECT: Recommendation to Introduce for First Reading an Ordinance Adding
Chapter 9.56 to the Santa Monica Municipal Code Establishing an
Affordable Housing Production Program and to Review Nexus Study
Introduction
This staff report recommends that the City Council introduce for first reading an ordinance
that will implement a new Affordable Housing Production Program to replace the City's
current Inclusionary Housing Program (Ordinance 1615). The proposed new program
requires developers of market -rate multifamily housing to assist in the production of
affordable housing through payment of an affordable housing development fee,
development of on-site affordable units or through other specified options. This report also
recommends that the City Council review the Nexus Study prepared by the consulting firm
of Hamilton, Rabinovitz & Alschuler, Inc. (HR&A) pursuant to Council's direction that staff
develop an affordable housing fee alternative.
Background
On April 15, 1997, the City Council approved the 1998-2003 Housing Element Update in
concept. Program 2,a of the Element requires review and revision of the City's
Inclusionary Housing Ordinance. At the April 15' meeting, the Council also directed staff
to develop a new affordable housing program.
' SR
JUL 14 1998
During the past fifteen (15) months, HR&A has been working with staff to develop a new
Affordable Housing Program as required by the City's adopted 19982003 Housing
Element (see Program 2.a). After considerable research and analysis, and numerous
public meetings, in February and March 1998, HR&A presented its preliminary
recommendations for revising the program to the Planning and Housing Commissions.
Staff, in turn, forwarded comments from the Planning and Housing Commissions to the City
Council.
On June 9, 1998, after considering the Planning and Housing Commissions'
recommendations and public comment, the City Council directed the City Attorney to draft
an ordinance implementing the Affordable Housing Production Program recommended in
the HR&A Report, Recommendations for Revising the City of Santa Monica's Inclusionary
Housing Program, dated April 6, 1998. At the same time, the City Council directed staff
to conduct a joint meeting of the Housing and Planning Commissions to seek their input
on the Proposed Affordable Housing Program ordinance. The proposed ordinance has
been prepared in accordance with the City Council's directive.
Summary of Proposed Affordable Housing Production Program Ordinance
The Proposed Affordable Housing Production Program Ordinance (see Attachment B)
would codify a new program with the following basic elements:
F
■ Development Fee. Developers of market rate multifamily projects (i.e., two or more
units) may elect to pay an affordable housing developmentfee to the City, assessed
on a per -gross square foot basis. The fees will be pooled and leveraged with other
available funding to develop affordable housing.
Simulations of the feasibility of typical multifamily projects, undertaken as part of the
constraint analysis, as well as the results of the Nexus Study indicate that there is
a reasonable basis for varying the fee based on product type.
Base fees will be established by Resolution of the City Council, after considering,
among other factors, the economic impact of the fee on typical market rate
multifamily development projects (constraints analysis) and the nexus between
market rate multifamily development and the need for affordable housing.
Establishing the base fee by resolution will allow the City Council to periodically
adjust the fee, if appropriate, without amending the ordinance. This resolution will
come before the City Council on July 21, 1998.
G Fee Reductions as an Incentive to Encourage Development Which will not Result
in Tenant Displacement. Most existing multi family residential developments in the
City have rent levels that are affordable to low and moderate -income households.
Therefore, to encourage residential development on sites that will not result in
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tenant displacement, it is proposed that the fee be reduced for multifamily projects
in the following circumstances:
-- Projects proposed for sites in multifamily residential districts that are vacant
at the time of the filing of the Planning permit application will be charged 75
percent of the affordable housing production fee;
-- Projects on non-residential sites (i.e., commercial or. industrial zoning
districts) will be charged 50 percent of the affordable housing production fee
unless the project would replace multifamily housing existing on the site;
- The affordable housing production fee will not be reduced for projects on
developed sites in multifamily residential districts.
■ On -Site Affordable Housing Production Option. As an alternative to paying an
affordable housing development fee, the developer of a new market rate multifamily
project may satisfy the affordability requirement by meeting the minimum thresholds
needed to qualify for the State -mandated density bonus (i.e., 10% affordable at
50% or less of Median Income, or 20% affordable at up to 60% of Median Income).
Projects that satisfy the State density bonus requirement will continue to be entitled
to additional zoning flexibilities under the City's Zoning Ordinance. State density
bonus projects are eligible for a density increase and reduced parking
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requirements, and may also apply for a variance to side yard setback requirements,
front or rear yard setback requirements, and parcel coverage requirements.
The proposed Affordable Housing Production Program ordinance also includes
further specifications about the on-site affordable units (e.g., qualifying household
incomes and minimum 2 -bedroom unit sizes).
■ Other Affordable Housing Production Options. Developers may also choose to
perform other actions which assist in the production of affordable housing, such as
off-site construction of affordable units within a specified radius of the market rate
project or purchasing or optioning land for an affordable housing development. For
off-site production, the proposed ordinance establishes the radius as one-quarter
mile.
It should be noted that under the current inclusionary housing program ordinance
(Ordinance 1615) it is possible to satisfy the affordable housing requirement by deed -
restricting 100 percent of the project units for moderate -income households. The new
Affordable Housing Program Ordinance eliminates this option. In view of the loss of
housing affordable to low- and very low-income households projected to result from the
Costa -Hawkins vacancy decontrol legislation, the new program focuses on producing
housing for low- and very -low income households only.
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The draft Affordable Housing Production Program ordinance will be retroactive to March 1,
1998. This is consistent with the time when, at the direction of City Council, staff began
to require as a standard condition of approval that new multifamily residential development
comply with all applicable requirements of the new Affordable Housing Production
Program.
The proposed ordinance provides that eligibility priorities for occupying affordable units
may be established administratively. Other elements of the program such as program
administration and reporting requirements are similar to those contained in the existing
program (Ordinance 1615).
Nexus Fee Stud
On June 9, 1998, the City Council reviewed the preliminary results of HR&A's analysis of
the relationship between new market rate apartment and condominium development in the
City and the need for affordable housing created by this new development. HR&A has
has now completed that analysis ("Nexus Study"). The Nexus Study (see Attachment B)
focuses on the relationship between the demand for goods and services created by
households who occupy new market rate multifamily development in the City, the number
of low-wage workers in public agencies and businesses needed to satisfy this demand,
and the costs of producing the affordable housing needed by these workers. It should be
noted that these fees are based in part upon the average subsidy gap to produce low-
income rental units in the City.
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The Nexus Study concludes that the average fee which can reasonably be charged to
developers of new market rate apartments is $6.14 per gross square foot and the average
fee which can reasonably be charged to developers of new market rate condominiums is
$7.13 per square foot. The apartment and condominium fees are based upon averaging
the two apartment prototypes and the two condominium prototypes, respectively. It is
appropriate to base the affordable housing production fee on an average of the fee
supported by these prototypes for the following reasons: (a) the Nexus Study analysis is
based upon reasonable estimates of the affordable housing demand generated by
prototypical new market rate apartment and condominiums, (b) the Nexus Study assumes
that all households residing in each prototypical project's dwelling units exhibit average
income and spending circumstances, and (c) there are pockets of lower-cost areas and
higher -cost areas in each City submarket area.
The Nexus Study also concludes that setting affordable housing production fees at the
average of the prototype amounts would not constitute a "constraint" on new development
within the meaning of State Housing Element law.
Comments from Elul 8` Joint Planning/Housing Commission Meeting
Per City Council direction, the Planning Commission and Housing Commission conducted
a joint meeting on July 8, 1998 to review the draft Affordable Housing Program Production
Ordinance and preliminary results of the Nexus Study. Comments from this meeting will
be transmitted to the City Council in a Supplement to this Staff Report.
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BudgetanLIFInancial Impact
The amount of fee revenue produced as a result of these amendments depends on the
number and scale of projects that apply for permits. Affordable housing fees collected pur-
suant to a new ordinance would be deposited into a deferred revenue account until they
can be programmed for use in accordance with established budget procedures and neces-
sary Council approvals. Approval of the newAffordable Housing Production Program does
not have a financial or budgetary impact at this time.
'04�DPL'Pil
.
It is respectfully recommended that the City Council:
1) Introduce for First Reading an Ordinance Adding Chapter 9.65 to the Santa
Monica Municipal Code Establishing an Affordable Housing Production Program;
2) Review the Nexus Study.
Prepared by: Jeff Mathieu, Director of Resource Management
Bob-Moncrief, Housing Manager
Tad Read, Senior Development Analyst
Attachments:
A Proposed Ordinance
Production Program
B Nexus Study
Establishing an Affordable Housing
ATTACHMENT A
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City Council Meeting 7-14-98 Santa Monica, California
ORDINANCE NUMBER _ (CCS)
(City Council Series)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA
ADDING CHAPTER 9.56 TO THE SANTA MONICA MUNICIPAL CODE
ESTABLISHING AN AFFORDABLE HOUSING PRODUCTION PROGRAM
THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES ORDAIN AS FOLLOWS:
SECTION 1. Chapter 9.56 is hereby added to the Santa Monica Municipal Code to read
as follows:
CHAPTER 9.56
AFFORDABLE HOUSING PRODUCTION PROGRAM
9.56.010. Findings and Purpose.
(a) Santa Monica is a coastal city in a prime location, being bordered by the City of Los
Angeles to the north, east and south. The combination of a scenic oceanside location, excellent
climate, and the ready availability of urban facilities, services, and entertainment make Santa
Monica an extremely desirable place to live.
(b) The land area of the City is very small — approximately eight (8) square miles. Santa
Monica is already a fully built -out city, with only sixty-two vacant residential parcels. It also has a
population of approximately 90,000. Santa Monica's population density, 11,200 persons per
square mile, is the second highest among neighboring and nearby jurisdictions, and is the densest
among coastal communities in Los Angeles County.
(c) The vast majority of new market rate multi -family development in the City is not
affordable to lower-income households. Moreover, market conditions, including the high cost of
residential land, construction costs, and the availability and cost of financing, make the
development of affordable housing in the. City extremely difficult,
(d) In addition, the consumption patterns of the upper-income households who occupy
these new market rate multi -family housing units create a need for affordable housing in the City.
More specifically, households create demand for goods and services in the private sector, such as
retail goods and medical services, and jobs in the public sector, such as teachers and municipal
services. The higher the household's income, the more demand is created. New market rate
multi -family housing in Santa Monica accommodates upper-income households almost exclusively
because of the high rent or purchase price required to occupy it. Supplying goods and services
sufficient to meet the demand created by upper-income households in new market rate multi-
family, housing requires workers across the pay scale spectrum, including lower -wage employees.
(e) The City has prepared an analysis of this relationship between new market rate
apartment and condominium development in the City and the need for affordable housing created
by this new development. This study focuses on the relationship between the demand for goods
and services created by households who occupy new market rate multi -family development in the
City, the number of low-wage workers in public agencies and businesses needed to satisfy this
demand, and the costs of producing the affordable housing needed by these workers. This study
demonstrates the range per square foot which could be imposed on new market rate multi -family
development to help finance the development of affordable housing needed to meet the demand
created by market rate development.
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(f) In addition, because the City is built -out, land available for residential development in
the City is limited. Further, land which could be used for development of housing for low income
households is being depleted by development of high cost housing. Thus, continued new
residential development which does not include or contribute toward the cost of housing for
lower income households will only serve to further exacerbate the current affordable housing
shortage.
(g) Requiring developers to assist in the production of affordable housing is also
consistent with the City's long-standing commitment to achieve and maintain a suitable living
environment including decent housing for persons at all economic levels. This municipal
commitment conforms with State and Federal policies and is a principal goal of the City's recently
adopted 1998-2003 Housing Element Update.
(h) The City has historically effectuated this commitment through extraordinary efforts
manifest in various City laws, policies and programs. For instance, the City's voters have adopted
initiative measures which strive to maintain'and promote affordable housing in the City. The Rent
Control Charter Amendment, adopted in 1979, has as its primary purpose the protection of
affordable housing and has historically been the City's most important legislative tool for
maintaining the supply of affordable housing. Similarly, Proposition R, adopted by the voters in
1990, mandates that thirty percent of all new multi -family housing units constructed in the City
each year be affordable.
(i) The City's zoning laws and policies also include substantial incentives for the
production of affordable housing, including height and density bonuses and reduced parking
requirements. In addition, the City operates a number of programs which facilitate the production
of affordable housing. These include loans to private, for-profit developers and owners and
funding to non-profit agencies to acquire or construct affordable housing units.
0) Despite the City's prime location and high real estate values, the City has historically
been highly successful in maintaining its economic diversity. According to the 1998-2003 Update,
23 percent of the City's households are very low income, 16.1 percent are low income, 20.7
percent are moderate income, and 40.1 percent are upper income. Moreover, 53 percent of
households residing in rent -controlled apartments are very low- and low-income. This diversity is
an essential element of the City's character. It sets the City apart from all other similarly situated
coastal cities in California.
(k) However, notwithstanding the City's ongoing commitment and efforts, changes in
State and Federal law and market conditions are making it increasingly difficult for the City to
ensure a continued supply of affordable housing. In 1986, the State enacted the Ellis Act which
enables a property owner to cease operating property as residential rental property. More
recently, in 1995, the State enacted the Costa -Hawkins Rental Housing Act which phases out
limits on the rents which a property owner may charge when re -renting voluntarily -vacated units.
Except in limited circumstances, it eliminates the City's ability to control the rent a property
owner can impose when a unit is initially rented. Although the full impacts of Costa -Hawkins will
not be felt until 1999 and the years thereafter, studies prepared by the Santa Monica Rent Control
Board tracking the rent levels of units decontrolled as a result of Costa -Hawkins demonstrates
that these units are already losing their affordability. Thus, this law is having and will continue to
have a significant impact on the City's supply of affordable housing. Moreover, there is an
extremely low vacancy rate for the existing rental housing stock. In addition, reductions in State
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and federal funding for affordable housing, changes in these programs, and the potential
expiration of controls on rents in federally -assisted projects all hinder the City's ability to provide
or promote affordable housing. In short, changes in State and federal law seriously threaten the
City's existing affordable housing stock. The decline in the affordability of this housing stock is
further exacerbated by the production of luxury market rate housing. Given current economic
conditions and the general desirability of the City, the new housing costs will only continue to
increase, thereby further exacerbating the growing shortage of housing affordable to very low -
and low-income households in the City.
(1) California's Housing Element law requires each city and county to develop local
housing programs designed to address its "fair share" of existing and future housing needs for all
income groups. The City's 1998-2003 Housing Element Update establishes the City's fair share
at 3,219 housing units of which 1,369 (43%) should be affordable to very low- and low-income
households.
(m) The Housing Element Update catalogues a dozen funding sources that the City
utilizes to assist in the development of affordable housing. These substantial resources are
projected to assist in the development of 403 new units affordable to low- and moderate- income
households. However, this represents only twenty-one (21%) of the estimated need for new
affordable housing in the City as established by the City's fair share. Consequently, the total
housing needs of the City exceed the City's available resources and the City's ability to meet these
needs. The vast majority of housing units have been and wilt continue to be produced by the
private housing industry.
(n) This Affordable Housing Production Program will benefit the City as a whole. Each
development which contributes to affordable housing through the provisions of this Chapter
augments the City's housing mix, helps to increase the supply of housing for all economic
segments of the community, addresses the affordable housing need generated by the development,
and thereby supports a balanced community which is beneficial to the public health, safety and
welfare of the City.
9.56.020. Definitions.
The -following words or phrases as used in this Chapter shall have the following meanings:
Affordable Housing Fee. A fee paid to the City by a multifamily project applicant
pursuant to Section 9.56.070 of this Chapter to. assist the City in the production of housing
affordable to very low- and low-income households.
Affordable Housing Unit. A housing unit developed by a multifamily project applicant
pursuant to Sections 9.56.050 or 9.56.060 of this Chapter which will be affordable to very low- or
low-income households.
Dwelling Unit. One or more rooms, designed, occupied, or intended for occupancy as
separate living quarters, with full cooking, sleeping, and bathroom facilities for the exclusive use
of a single household. Dwelling unit shall also include single room occupancy units as defined in
Santa Monica Municipal Code Section 9.04.02.030.790.
Floor Area. Floor area as defined in Santa Monica Municipal Code Section
9.04.02.030.315.
HUD. The United States Department of Housing and Urban Development or its
successor.
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Income Eligibility. The gross annual household income considering household size and
number of dependents, income of all wage earners, elderly or disabled family members, and all
other sources of household income.
"Low" and "Very Low" Income Levels. Income levels determined periodically by the
City based on the United States Department of Housing and Urban Development (HUD) estimate
of median family income in the Los Angeles -Long Beach Primary Metropolitan Statistical Area.
The major income categories are: "low income" (sixty percent or less of the area median) and
"very low income" (fifty percent or less of the area median). Adjustment shall be made by
household size as established by the City.
Market Rate Unit. A dwelling unit as to which the rental rate or sales price is not
restricted by this Chapter.
Maximum Affordable Rent. A monthly housing charge which does not exceed one -
twelfth of thirty percent of the maximum very low- and low- income levels as defined in this
Chapter and adopted each year by the City. This charge shall represent full consideration for
housing services and amenities as provided to market rate dwelling units in the project, whether or
not occupants of market rate dwelling units pay separate charges for such services and amenities.
Housing services and common area amenities include, but are not limited to, the following:
parking, use of common facilities including pools or health spas, and utilities if the project is
master -metered. Notwithstanding the foregoing, utility charges for use of natural gas and
electricity, to the extent individually metered for each unit in the project, may be passed through
or billed directly to the occupants of affordable housing units in the project in addition to
maximum allowable rents collected for those affordable housing units.
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Multifamily District. Any zoning district in which multifamily dwelling units are a
permitted use.
Multifamily Project. A multifamily residential development, including but not limited to
apartments, condominiums, townhouses, or the multifamily residential component of a mixed-use
project, for which City permits and approvals are sought.
Multifamily Project Applicant. Any person, firm, partnership, association, joint
venture, corporation, or any entity or combination of entities which seeks City development
permits or approvals to developed a multifamily project.
9.56.030. Applicability of Chapter
(a) The obligations established by this Chapter shall apply to each multifamily project for
which a development application was deemed complete on or after March 1, 1998 involving the
construction of two or more market rate units. No building permit shall be issued for any
multifamily project unless such construction has been approved in accordance with the standards
and procedures provided for by this Chapter.
(b) Multifamily projects for which a development application was deemed complete prior
to March 1, 1998 shall be subject to the provisions of Santa Monica Municipal Code Section 9.28
et seq. as they existed on the date the application for the project was deemed complete.
Section 9.56.040. Affordable Housing Obligation
All multifamily project applicants subject to the provisions of this Chapter pursuant to
Section 9.56.030 shall choose one of the following options to meet the requirements of this
Chapter:
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(a) Providing affordable housing'units on-site in accordance with Section 9.56.050.
(b) Providing affordable housing units off-site in accordance with Section 9.56.060.
(c) Paying an affordable housing fee in accordance with Section 9.56,070:
(d) Acquiring land for affordable housing in accordance with Section 9.56.080.
A multifamily project application will not be deemed complete until the applicant has
submitted plans and proposals which demonstrate the manner in which the requirements of this
Chapter will be met.
Section 9.56.050. On -Site Option
A multifamily project applicant may meet the affordable housing obligations established by
this Chapter by providing affordable housing units on-site in accordance with the following
requirements:
(a) The multifamily project applicant agrees to construct at least (i) twenty percent (20%)
of the total units of a project for low income households or (ii) ten percent (10%) of the total
units of a project for very low income households. Any fractional affordable housing unit that
result from the formulas of this subsection (a) shall be treated as a whole affordable housing unit
(i.e.: any resulting fraction shall be rounded up to the next larger integer) and that unit shall also
be built pursuant to the provisions of this section. The Planning and Community Development
Department shall make available a list of very low and low income levels adjusted for household
size, the corresponding maximum affordable rents adjusted by number of bedrooms, and the
minimum number of very low- or low-income units required for typical sizes of multi -family
projects, which list shall be updated periodically.
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(b) The multifamily project applicant may reduce either the size or interior amenities of
the affordable housing units as long as there are not significant identifiable differences between
affordable housing units and market rate units visible from the exterior of the dwelling units,
provided that all dwelling units conform to the requirements of the applicable Building and
Housing Codes. However, each affordable housing unit provided shall have at least two
bedrooms unless (i) the proposed project comprises at least ninety-five (95%) one bedroom units,
excluding the manager's unit, in which case the affordable housing units may be one bedroom or
(ii) the proposed project comprises at least ninety-five percent (95%) SRO units in which case the
affordable housing units may be SRO units. The size and design of the affordable housing units
shall be reasonably consistent with the market rate units in the project. In no event shall an
affordable housing unit have a minimum total floor area, depending upon the number of bedrooms
provided, less than the following:
0 Bedrooms 500 Square Feet
1 Bedroom 600 Square Feet
2 Bedrooms 850 Square Feet
3 Bedrooms 1080 Square Feet
4 Bedrooms 1200 Square Feet
Affordable housing units in multifamily projects of one hundred (100) units or more must be evenly
disbursed throughout the multifamily project to prevent undue concentrations of affordable housing
units.
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(c) All affordable housing units in a multifamily project or a phase of a multifamily
project shall be constructed concurrently with the construction of market rate units in the
multifamily project or phase of that project.
(d) On-site affordable housing units must be rental units in rental projects. In
ownership projects, affordable housing units may be either rental units or ownership units.
Affordable housing ownership units shall comply with requirements concerning sales price,
monthly payment, and limited equity and resale restrictions as established by resolution of the City
Council to ensure that subsequent purchasers are also income -qualified households.
(e) Each multifamily project applicant, or his/her successor, shall submit an annual report
to the City identifying which units are affordable units, the monthly rent (or total housing cost if
an ownership unit), vacancy information for each affordable unit for the prior year, verification of
income of the household occupying each affordable unit throughout the prior year, and such other
information as may be required by City staff.
(f) A multifamily project applicant who meets the requirements of this Section shall be
entitled to the density bonus development standards established in Santa Monica Municipal Code
Section 9.04.10.14.040.
(g) All residential developments providing affordable housing on-site pursuant to the
provisions of this Section shall receive priority building department plan check processing by
which housing developments shall have plan check review in advance of other pending
developments to the extent authorized by law,
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Section 9.56.060. Off-site Option.
A multifamily project applicant may meet the affordable housing obligations established by
this Chapter by providing affordable housing units off-site in accordance with the following
requirements:
(a) The multifamily project applicant shall agree to construct the same number of
affordable housing units as specified in Section 9.56.050.
(b) The multifamily project applicant shall identify an alternate site suitable for residential
housing which the project applicant either owns or has site.control over (e.g., purchase
agreement, option to purchase, lease) subject to City review to ensure that the proposed
development is consistent with the City's housing objectives and projects.
units.
(c) The off-site units shall be located within a one-quarter mile radius of the market rate
(d) The off-site units shall satisfy the requirements of subsections (b) -(f) of Section
9.56.050.
(e) The off-site units shall not count towards the satisfaction of any affordable housing
obligation that development of the alternative site with market rate units would otherwise be
subject to pursuant to this Chapter.
(f) Exceptions to the location of the off-site units specified in this Section may be granted
by the Planning Commission on a case-by-case basis upon a showing by the multifamily project
applicant, based upon substantial evidence, that the location of off-site units in a location different
from that specified in this Section better accomplishes the goals of this Chapter.
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(g) The Housing Division of the Resource Management Department shall prepare
administrative guidelines to implement this Section.
Section 9.56.070. Affordable Housing Fee.
A multifamily project applicant may meet the affordable housing obligations established by
this Chapter by paying an affordable housing fee in accordance with the following requirements:
(a) An affordable housing fee may be paid in accordance with the following formulas:
(1) Projects in Multifamily Residential Districts
Affordable housing unit base fee X floor area of multifamily project
(2) Projects in Multifamily Residential Districts on sites vacant at time of
filing of multifamily project application
Affordable housing unit base fee X floor area of multifamily project
X 75%
(3) Residential Projects in Non-residential Districts on sites that are not
already developed with multifamily housing
Affordable housing unit base fee X floor area of project devoted
to residential uses X 50%.
(b) For purposes of this Section, the affordable housing unit base fee shall be established
every two years by resolution of the City Council.
(c) The amount of the affordable housing unit base fee may vary by product type
(apartment or condominium) and shall reflect, among other factors, the relationship between new
market rate multi -family development and the need for affordable housing and the impact that the
fee will have on the financial return of multifamily project applicants.
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(d) The fee shall be paid in full to the City prior to the City granting any approval for the
occupancy of the project.
(e) The City shall deposit any payment made pursuant to this Section in a Reserve
Account separate from the General Fund to be used only for development of very low- and low-
income housing, administrative costs related to the production of this housing, and monitoring
and evaluation of this Affordable Housing Production Program. Any monies collected and
interest accrued pursuant to this Chapter shall be committed within five (5) years after the
payment of such fees or the approval of the multifamily project, which ever occurs later. Funds
that have not been appropriated within this five year period shall be refunded on a pro rata share
to those multifamily project -applicants who have paid fees during the period. Expenditures and
commitments of funds shall be reported to the City -Council annually as part of the City budget
process.
(f) An affordable housing fee payment pursuant to this Section shall not be considered
provision of affordable housing units for purposes of determining whether the multifamily project
qualifies for a density bonus pursuant to Government Code Section 65915.
Section 9.56.080. Land Acquisition.
A multifamily project applicant may meet the affordable housing obligations established by
this Chapter by making an irrevocable offer. (a) dedicating land to the City or a non-profit
housing provider, (b) selling of land to the City or a non-profit housing provider at below market
value, or (c) optioning of land on behalf of the City or a non-profit housing provider. Each of
these options must be for a value at least equivalent to the affordable housing obligation otherwise
required pursuant to this Section. The multifamily project applicant must identify the land at the
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time that the development application is filed with the City. The City may approve, conditionally
approve or reject such offers subject to administrative guidelines to be prepared by the Housing
Division of the Resource Management Department. If the City rejects such offer, the multifamily
project applicant shall be required to meet the affordable housing obligation by other means set
forth in this Chapter.
Section 9.56.090. Fee waivers.
The Condominium and Cooperative Tax described in Section 6.76.010 of the Santa
Monica Municipal Code and the Park and Recreation Facilities Tax established in Chapter 6.80 of
Article 6 of the Santa Monica Municipal Code shall be waived for required affordable housing
units and for low and very low income dwelling units developed by the City or its designee using
affordable housing fees. However, any multifamily project applicant who elects to pay an
affordable housing fee shall not be eligible for any fee waiver under this Section.
Section 9.56.100. Pricing requirements for affordable housing units.
The City Council shall, by resolution, on an annual basis, set maximum affordable rents
and maximum affordable purchase prices for affordable housing units, adjusted by the number of
bedrooms. Such maximum affordable rents shall be set at rates such that qualified occupants for
low income units pay monthly rent that does not exceed thirty percent of the gross monthly
household income for households earning sixty percent of the median income and that qualified
occupants for very low income units pay monthly rent that does not exceed thirty percent of the
gross monthly household income for households earning fifty percent of the median income. Such
maximum affordable purchase price shall be set at rates such that qualified occupants for low
income units pay total monthly housing costs (mortgage payment, property taxes, homeowners'
15
insurance, property mortgage insurance, homeowners' association fees) that do not exceed thirty-
eight percent of the gross monthly household income for households earning sixty percent of the
median income and that qualified occupants for very low income units pay total monthly housing
costs (mortgage payment, property taxes, homeowners' insurance, property mortgage insurance,
homeowners' association fees) that do not exceed thirty-eight percent of the gross monthly
household income for households earning fifty percent of the median income.
Section 9.56.110. Eligibility requirements.
(a) Only low-income and very low-income households shall be eligible to occupy or own
and occupy affordable housing units. The City shall develop a list of income -qualified households,
which may include priorities for eligible tenants. Multifamily project applicants shall be required
to select households from the City -administered list of income -qualified households.
(b) The City shall develop administrative guidelines for the tenant and purchaser selection
process, which shall establish, at a minimum, the timing by which affordable housing units in a
project must be leased or sold and occupied, both initially after issuance of the certificate of
occupancy for the'project and upon subsequent vacancies in the affordable housing unit.
(c) The following individuals, by virtue of their position or relationship, are ineligible to
occupy an affordable housing unit:
(1) All employees and officials of the City of Santa Monica or its agencies, authorities,
or commissions who have, by the authority of their position, policy-making authority or influence
affecting City housing programs.
(2) The immediate relatives, employees, or other persons gaining significant economic
benefit from a direct business association with public employees or officials.
16
(3) The immediate relatives of the applicant or owner, including spouse, children,
parents, grandparents, brother, sister, father-in-law, mother-in-law, son-in-law, daughter-in-law,
aunt, uncle, niece, nephew, sister-in-law, and brother-in-law.
Section 9.56.120. Relation to units required by Rent Control Board.
Very low-income and low-income dwelling units developed as part of a market rate
project, pursuant to replacement requirements of the Santa Monica Rent Control Board, shall
count towards the satisfaction of this Chapter if they otherwise meet applicable requirements for
this Chapter including, but not limited to, the income eligibility requirements, deed restriction
requirements, and pricing requirements. New inclusionary units required by the Rent Control
Board which meet the standards of this Chapter shall count towards the satisfaction of this
Chapter.
Section 9.56.130. Deed Restrictions.
Prior to issuance of a building permit for a project meeting the requirements of this
Chapter by providing affordable units on-site or off-site, the multifamily project applicant shall
submit deed restrictions or other legal instruments setting forth the obligation of the applicant
under this Chapter for City review and approval. Such restrictions shall be effective for at least
fifty-five years.
Section 9.56.140. Enforcement.
No building permit or occupancy permit shall be issued, nor any development approval
granted, for a project which is not exempt and does not meet the requirement of this Chapter. All
affordable housing units shall be rented or owned in accordance with this Chapter.
17
Section 9.56.150. Annual Report.
The Housing Division of the Resource Management Department shall submit a report to
the City Council on an annual basis which shall contain information concerning the
implementation of this Chapter. This report shall also detail the projects that have received
planning approval during the previous year and the manner in which the provisions of this Chapter
were satisfied. This report shall further assess whether the provisions of Proposition R have been
met and whether changes to this Chapter or its implementation procedures are warranted. In the
event the provisions of.Proposition R have not been met, the City Council shall take such action
to amend the provisions of this Chapter or its implementation to ensure that the provisions will be
met in the future.
Section 9.56.160. Principles and Guidelines.
(a) In addition to the administrative guidelines specifically required by other provisions of
this Chapter, the City Manager or his or her designee shall be the designated authority to develop
and implement rules and regulations pertaining to this Chapter, to enter into recorded agreements
with multifamily project applicants, and to take other appropriate steps necessary to assure that
the required affordable housing units are provided and are occupied by very low- and low-income
households.
(b) Within one year from the passage of this Chapter, administrative rules and regulations
pertaining to this Chapter shall be brought before the City Council for adoption.
SECTION 2. Chapter 9.28 of the Santa Monica Municipal Code is hereby repealed in its
entirety and the Chapter 9.28 implementation guidelines are rescinded.
18
SECTION 3. Any provision of the Santa Monica Municipal Code or appendices thereto
inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no
further, is hereby repealed or modified to that extent necessary to effect the provisions of this
Ordinance.
SECTION 4. If any section, subsection, sentence, clause, or phrase of this Ordinance is
for any reason held to be invalid or unconstitutional by a decision of any court of competent
jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance.
The City Council hereby declares that it would have passed this Ordinance and each and every
section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without
regard to whether any portion of the ordinance would be subsequently declared invalid or
unconstitutional.
SECTION 5. The Mayor shall sign and the City Clerk shall attest to the passage of this
Ordinance. The City Clerk shall cause the same to be published once in the official newspaper
within 15 days after its adoption. This Ordinance shall become effective 30 days from its
adoption.
APPROVED AS TO FORM:
MARSHA S MOUTRIE
City Attorney
T
ATTACHMENT B
HAMILTON, RABINOVITZ & ALscHULER, INC.
Policy, Financial tic Management Consultants
DRAFT
THE NEXUS BETWEEN NEW MARKET RATE
MULTI -FAMILY DEVELOPMENTS
IN THE CITY OF SANTA MONICA AND
THE NEED FOR AFFORDABLE HOUSING
July 7, 1995
1990 SOUTH BUNDY DRIVE, SUITE. 777, TAS ANGELES, CALIFORNIA 90025 • TEL: 310.820.3444 • FAX: 31o.820.()778
NEW YORK LOS ANCA -MES
Contents
TABLE OF CONTENTS
Listof Tables.............................................................. iii
I. EXECUTIVE SUMMARY ............................................. 1
II. SCOPE AND PURPOSE OF THE ANALYSIS ............................. 7
A. Background to the City's Proposed Affordable Housing Production Program ... 7
B. Selection of the Analytic Approach .................................. 12
C. Organization of the Report ........................................ 17
in. HOUSEHOLD INCOME AND SPENDING IN NEW MARKET RATE
MULTI -FAMILY DEVELOPMENTS ................................... 19
A. Estimating Total Household Income in Typical New Market Rate Multi -Family
Developments..................................................19
B. Estimating Total Household Spending for Goods and Services in Typical New
Market Rate Multi -Family Developments ............................. 25
IV. THE CONSUMPTION -RELATED EMPLOYMENT AND EMPLOYEE
AFFORDABLE HOUSING IMPACTS OF NEW MARKET RATE MULTI-
FAMILY DEVELOPMENT ........................................... 28
A. Marginal Employment Impacts Generated from Consumption Expenditures by
Households in New Market Rate Multi -Family Developments in Santa Monica. 28
B. Marginal Affordable Housing Impacts Generated from Consumption
Expenditures by Households in New Market Rate Multi -Family Developments in
SantaMonica..................................................34
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Contents
Paye
V. ESTIMATING JUSTIFIABLE DEVELOPMENT FEES .................... 39
A. The City's Subsidy Gap to Develop Rental Units Affordable to Low -Income
Households...................................................39
B. Justifiable Development Fees ...................................... 44
APPENDICES
A. Total Employment Impacts Generated By Household Consumption Expenditures
for Four Prototypical Market Rate Multi -Family Developments in the City of Santa
Monica
B. Estimates of the Capital Subsidy Needed to Develop an Affordable Rental Unit in
the City of Santa Monica Under Alternative Affordability Thresholds, Land Costs
and Unit Sizes
C. Derivation of a Development Fee for Four Prototypical New Market Rate Multi -
Family Developments in the City of Santa Monica
New Multi -Family Development Affordable Housing Nexus Page iii
Hamilton, Rahinovitz &A Ischuler, Inc. July 7,1448
Contents
LIST OF TABLES
T ble o T, itle Rag -e-
I-1 Derivation of Low-income Worker Household Demand Resulting from
Total Household Consumption Expenditures in Four Prototypical
5 -Unit Market Rate Multi -Family Developments ......................... 4
1-2 Derivation of a Development Fee to Offset the Affordable Housing Demand
Caused by Total Household Consumption Expenditures In Four Prototypical
5 -Unit Market Rate Multi -Family Developments ......................... 6
III -1 Rents Required for Financially "Feasible" New Market Rate Apartment
Development in the R2 District ..................................... 21
III -2 Household Incomes in Prototypical New Apartment Developments Implied by
Various Rent -to -Income Ratios .................................... 22
III -3 Purchase Price Required for Financially "Feasible" New Market Rate
Condominium Development in the R2 District ...... I ..... I ...... I ..... 23
III -4 Estimates of Average Annual Per -Household and Per -Project Incomes in Four
Prototypical New Market Rate Multi -Family Developments in the City of
SantaMonica..................................................24
III -5 Personal Income and its Disposition in the U.S-., 1995 .................... 26
III -6 Total Annual Household Income and Consumption Expenditures for Four
Prototypical 5 -Unit New Market Rate Multi -Family Developments in
the City of Santa Monica ...................... I ...... I ........ I ... 27
IV -1 Distribution of Employment Resulting from Household Consumption
Expenditures in Los Angeles County, Market Rate Multi -Family Prototype #2
(Apartment -Higher Cost Area) ..................................... 33
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Contents
P. aXe
IV- 2 Total Employment Demand Resulting from Total Household Consumption
Expenditures in Four Prototypical Market Rate Multi -Family Developments
In the City of Santa Monica ....................................... 34
IV -3 Derivation of Low-income Worker Demand Resulting from Total Household
Consumption Expenditures in Four Prototypical 5 -Unit Market Rate Multi -
Family Developments in the City of Santa Monica ........... ............ 37
IV -4 Derivation of Low-income Worker Household Demand Resulting from Total
Household Consumption Expenditures in Four Prototypical 5 -Unit Market Rate
Multi -Family Developments ....................................... 38
V-1 Per-unit New Development Subsidy Gap for Very Low- and Low- Income
Households, City of Santa Monica, 1998 ............................. 43
V-2 Derivation of a Development Fee to Offset the Affordable Housing Demand
Caused by Total Household Consumption Expenditures in Four Prototypical
5 -Unit Market Rate Multi -Family Developments in the City of Santa Monica .. 44
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Hamilton, Rahinovitz &A Ischuler, Inc. July 7, 1998
I. EXECUTIVE SUMMARY
The City of Santa Monica, California ("City") is considering a new ordinance that will
require developers of market rate multi -family developments (i.e., apartments and condominiums)
to help meet the need for housing affordable to low-income households, as defined by federal,
State of California and City regulations {"affordable housing"), which is caused by their projects.
The proposed ordinance allows developers to include units in their project that are affordable to
low-income households, pay a fee to the City that will be used to help finance new affordable
housing, or take other specified actions, including purchase of land for affordable housing. This
new program was specified in a recent update of the Housing Element of the City's General Plan.
In light of recent U.S. and California Supreme Court decisions, any fee the City may
impose pursuant to this new program must be based on constitutional principles. These decisions
suggest that there must a legitimate public purpose underlying the imposition of the fee, and there
must be a reasonable relationship between the public needs created by a development project and
the amount of the fee imposed. The public purpose underlying the City's program is articulated in
its recent Housing Element update, including its supporting technical appendices, and the findings
in the proposed ordinance. This Report, which was prepared by Hamilton, Rabinovitz &
Alschuler, Inc. C"HR&A") at the request of the City, presents analysis and conclusions which
demonstrate the extent of affordable housing need that is causally related to new market rate
multi -family development in the City, and the development fee amounts that could reasonably be
required of developers.
Each new market rate multi -family development project constructed and occupied in the
City adds new households with particular income and spending characteristics. These households
create demand for goods and services, in the private sector (e.g., restaurants, retail goods and
medical services) and in the public sector (teachers and municipal services). In general, the higher
a household's income, the more dollars are spent for goods and services. New market rate multi-
family housing in Santa Monica accommodates upper-income households almost exclusively,
because of the high cost of rent or purchase price required to occupy it. Supplying goods and
services sufficient to meet the consumption demand from upper-income households in new market
rate multi -family housing requires workers across the pay scale spectrum, including lower -wage
employees. Some of these lower -wage workers are members of low-income households who
require housing at prices they can afford. As a result, new market rate multi -family development
is causally related to a demand for housing that is affordable to lower -wage workers and their
households. The City may, therefore, request that developers provide part of the cost of meeting
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Hamilton, Rahinovita & Alschuler, Inc. July 7, 1998
Executive Summu
the affordable housing demand generated by their projects, through payment of an affordable
housing fee, should they elect this option under the proposed new City program.
Estimating the marginal affordable housing demand caused by new market rate multi-
family developments in Santa Monica, and a development fee that relates to this impact, was
determined through a four-part analysis, as summarized below. The analysis uses four
prototypical market rate multi -family projects -- two apartment and two condominium projects;
one of each developed in a lower-cost subarea of the City (i.e., relatively lower land prices and
rents, such as in the Mid -City area between Wilshire and Pico Boulevard and east of downtown
Santa Monica) and a higher -cost subarea of the City (i.e., relatively higher land prices and rents,
such as north of Wilshire Boulevard and some parts of the Ocean Park community). HR&A's
analytic approach was selected after review and consideration of the professional literature, the
few examples of related analyses that have been conducted to date in other jurisdictions, and
suggestions by City Council members and City Commissioners.
1. Estimate Per -Project Household Income and Sf)ending
Detailed analysis of the financial circumstances of typical new apartment and
condominium projects developed in the City that was prepared for the recent Housing Element
update demonstrates that developers must charge high rents or purchase prices in order to earn a
financial return sufficient to justify the investment. The households who can afford to pay these
levels of rent (in the case of market rate apartment projects) or purchased housing costs (i.e.,
mortgage payments, property insurance, property taxes and homeowners' association dues, in the
case of market rate bondominium projects) are, by most any definition, upper-income households.
HR&A estimated that rents for market rate apartments developed on sites in the City's R2
multi -family residential district must average between $2,100 and $2,600, depending on the
submarket area of the City. Assuming, based on a survey of households residing in newly
constructed apartments exempt from rent control that was conducted for the Housing Element
update, that rent for such units represents, on average, 37 percent of household income, the
average income for households paying rent of this scale must be between about $67,000 and
$85,000 per year. The typical five -unit apartment development therefore includes total household
income of between about $335,000 and $425,000. Analysis for the Housing Element also found
that the average purchase price for new condominiums needs to be in a range of $316,000 to
$418,000, again depending on the submarket area of the City, in order for developers of typical
projects. Assuming, based on generally accepted residential lending criteria, that total purchased
housing costs do not exceed 35 percent of household income, a household would need an income
of between about $78,000 and $99,000 to purchase condominiums in this price range. For a
typical five -unit project, this implies between $390,000 and $495,000 of total per -project
household income.
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Executive Summar
Data on household expenditure patterns indicates that, on average, about 75.5 percent of
total household income is available for consumption expenditures, including housing costs. The
remainder is attributable to taxes, social insurance contributions (e.g., wage earner's share of
payments into Social Security), savings and consumer interest. Applying this consumption
expenditure percentage to total per -project household income means that typical five -unit market
rate apartment and condominium projects generate between $253,000 and $375,000 in annual
spending on goods and services.
2. Estimate the Employment Impacts of Per -Project Household Spending
The next step in the analysis was to derive the employment impacts of these estimates of
consumption -related spending by households in typical market rate multi -family projects. This
was accomplished using the IMPLAN input-output model of the economy of Los Angeles
County. Input-output models are used to trace the economic effects, including employment, that
result from a change in a regional economy, such as the consumption expenditures by households
in new market rate multi -family housing in Santa Monica. FvIPLAN is one such input-output
model that is particularly well suited to this type of analysis. First, it provides analysis that is
particular to the economy of Los Angeles County. Second, it provides estimates of total
employment for each of 528 sectors of the local economy for each dollar of household spending.
This includes estimates of direct employment (i.e., at the restaurant or retail store where a
purchase is made), indirect employment (Le., in the industries suppling materials to the restaurant
or retail store) and induced employment (i.e., due to consumption spending by direct and indirect
employees). Third, the model generates employment patterns that correspond specifically to the
spending characteristics of upper-income households, like those who occupy typical new market
rate multi -family developments in the City.
The IMPLAN analysis indicates that consumption expenditures by upper-income
households in typical new market -rate multi -family developments in Santa Monica generate
between 3.74 and 5.54 total workers, primarily in the retail trade and services sectors of the
economy.
3. Estimate the Number of Loop -Income Households Related to the Employment Impacts
of Per -Project Household Spending.
Not all of these workers are low-income, and only some of these are members of
households that meet the definition of a "low-income" household -- i.e., earning up to 60 percent
of the Los Angeles County median income, or about $25,000 per year for a two -person
household. Deriving the subset of households meeting these criteria was accomplished using the
Public Use Microdata Sample (PDMS) for Los Angeles County, a specialized scientific sample of
1990 census data. The most widely available census data are useful only in the summary form
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Executive Summa
published -- i.e., discrete characteristics of a geographic area. PUMS data, on the other hand,
allow for cross -tabulations of census data, such as household income by the industry in which the
household members work. The PDMS data used an industry classification numbering system that
corresponds with the industry numbering system in the IMPLAN model. This relationship made it
possible to produce a cross -tabulation between the IMPLAN industry sectors that account for
over 90 percent of the consumption -related jobs attributable to new market rate multi -family
project and the household income of workers in those industries. After adjusting for the
differences between the 1997 definition of "low-income" households and the 1989 household
incomes in the 1990 census, estimates were made of the number of "low-income" workers
generated by the consumption spending associated with each of the four prototypical new market
rate multi -family projects in Santa Monica. For the sum of the affected industries, about 17% of
all workers fit the "low-income" definition, or between about two-thirds (0.63) and one (0.93)
low-income worker per new market rate multi -family development.
The next step was to estimate the number of low-income households associated with these
low-income workers. This was also accomplished using cross -tabulations of the PUMS data.
The result is an average of 2.36 workers per household in which at least one worker is employed
in an industry affected by consumption spending by households in new market rate multi -family
projects in Santa Monica.
The summary results of steps one through three are shown in Table I-1, below.
Table 1-1
DERIVATION OF LOW-INCOME WORKER HOUSEHOLD DEMAND RESULTING FROM
TOTAL HOUSEHOLD CONSUMPTION EXPENDITURES IN
FOUR PROTOTYPICAL 5 -UNIT MARKET RATE MULTI -FAMILY DEVELOPMENTS,
CITY OF SANTA MONICA
Prototype Per -Prototype Total Low-income Low -Income
Hhld. Income Workers Workers Worker Hhlds.
Apt. -- Lower Cost Area
$335,189
3.74
0.63
0.27
Apt. - Higher Cost Area
$425,919
4.76
0.80
0.34
Condo -- Lower -Cost Area
$387,681
4.33
0.73
0.31
Condo - Higher -Cost Area $496,260 5.54 0.93 0.39
AVERAGE $491,263 4.59 0.77 0.33
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Executive Summary
4. Estimate an Affortlable Housing Fee to Offset the Affordable Housing Demand of
Per -Project Household Spending
The above table shows the estimated marginal demand for affordable housing caused by
the consumption spending from typical new market rate multi -family developments. The cost of
producing this much affordable housing, taking into account any other fund sources that are
reasonably foreseeable, is a basis for arriving at a reasonable development fee.
Previous HR&A analysis estimated that it costs between about $183,000 and $275,000,
depending on the City submarket area, to develop two- or three-bedroom apartment units in the
R2 multi -family residential district that is affordable to a low-income household, under applicable
income and rent thresholds. This sum includes the costs of land, construction, professional fees,
permits and financing. At this time, only the amount of debt that can be supported by low-income
tenant household incomes can be counted on to help pay this cost. Competition for federal Low -
Income Housing Tax Credits, which are about the only non -City financial resource available for
the development of affordable housing, cannot be assumed for every project the City would
sponsor in the future. Accounting for tenant -supportable debt and assumptions about the most
likely mix of units sizes and City submarket areas where new affordable housing would be
constructed, it was estimated that the average City financial contribution, or subsidy, to produce
an affordable unit is about $155,000.
Multiplying this average per-unit subsidy amount by the number of affordable housing
units needed to meet the consumption demands of new market rate multi -family developments
yields the fee amount that could reasonably be charged to the developer to offset the City's costs.
This fee amount can also be expressed as a function of the gross floor area of a typical new
market rate multi -family development, as shown in Table I-2.
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Executive Summar
Table 1-2
DERIVATION OF A DEVELOPMENT FEE TO OFFSET THE AFFORDABLE HOUSING DEMAND
CAUSED BY TOTAL HOUSEHOLD CONSUMPTION EXPENDITURES
IN FOUR PROTOTYPICAL 5 -UNIT MARKET RATE MULTI -FAMILY DEVELOPMENTS,
CITY OF SANTA MONICA
Prototype Per -Prototype Units of Total Fee Amount
Hhld. Income Low -Income Fee Per Gross
Housing Amount 2 Square Foot a
Demand'
Apt. -- Lower Cost Area $335,189 0.27 $41,090 $5.41
Apt. -- Higher Cost Area $425,919 0.34 $52,215 $6.87
Condo -- Lower -Cost Area $387,681 0.31 $47,525 $6.26
Condo -- Higher -Cost Area $496,260 0.39 $60,835 $8.01
' From Table 1-1.
z Housing Demand x $154,916 per unit (City's average subsidy gap).
3 Total Fee Amount divided by 7,595 gross square feet per typical market rate multi -family development.
Source- HR&A
Considering that the analysis is based on reasonable estimates of the affordable housing
demand generated by prototypical new market rate apartments and condominiums, assumes that
all households residing in each prototypical project's dwelling units exhibit average income and
spending circumstances, and that there are pockets of lower-cost areas and higher -cost areas in
each City submarket area, it would be appropriate for the Affordable Housing Production
Program fee to be based on an average of the justifiable fees for each product type. The average
of the justifiable fee for the two apartment prototypes is $6.14 per gross square foot for new
market rate apartment developments, and $7.13 per gross square foot for new market rate
condominium developments. These amounts are generally consistent with the fees that previous
analysis indicates can be assessed such projects without the fee becoming a "governmental
constraint" on new development, within the meaning of State Housing Element law.
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H. PURPOSE AND SCOPE OF THE ANALYSIS
The City of Santa Monica, California ("City") is considering a new ordinance to require
developers of market rate multi -family developments (i.e., apartments and condominiums) to help
meet the need for housing affordable to low-income households ("affordable housing"), as defined
by federal, State of California and City regulations, which is caused by their projects. The
proposed Affordable Housing Production Program ordinance allows developers to choose to
include units in their project that are affordable to low-income households, pay a fee to the City
that will be used to help finance new affordable housing, or take other specified actions, including
purchase of land for affordable housing. This new program was specified in a recent update of
the Housing Element of the City's General Plan.'
In light of recent U.S. and California Supreme Court decisions, any fee the City may
impose pursuant to this new program must be based on constitutional principles. These decisions
suggest that there must a legitimate public purpose underlying the imposition of the fee, and there
must be a reasonable relationship between the public needs created by a development project and
the amount of the fee imposed. The public purpose underlying the City's program is articulated in
its recent Housing Element update, including its supporting technical appendices, and the findings
in the proposed ordinance. This Report, which was prepared by Hamilton, Rabinovitz &
Alschuler, Inc. ("HR&A") at the request of the City, presents analysis and conclusions which
demonstrate the extent of affordable housing need that is causally related to new market rate
multi -family development in the City, and the development fee amounts that could reasonably be
required of developers.
A. BACKGROUND TO THE CITY'S PROPOSED AFFORDABLE HOUSING
PRODUCTION PROGRAM
For more than a decade, the City of Santa Monica has required developers of market rate
multi -family housing to help offset the impacts that their projects have on the City's household
income balance, in order to comply with State and City law and local housing policies. The
developer assistance is but one component of a multi -faceted housing program that also relies on
City and other public funds to construct new housing units that are affordable to lower-income
households. Following detailed review in April 1997, the City Council concluded that the current
developer requirement, the Inclusionary Housing Program as embodied in Ordinance 1615 and
' City of Santa Monica, 1998-2003 Housing Element Update, adopted by the City Council June 9, 1998.
(Hereinafter referred to as "Housing Element Update" or "Update")
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Purpose and Scope
related guidelines,' needed to be changed in order to address problems with the program, and
changes in the local housing market, State law and the funding environment for affordable
housing.
1. Overview of the Proposed Affordable Housing Production Program
After considering comments on six conceptual alternatives to Ordinance 1615, it was
recommended that the City discontinue the current project -by -project inclusionary housing
production approach, and instead enact a program that requires developers of market rate multi-
family housing to pay an affordable housing development fee to the City, or choose from among
other specified alternatives to fee payment. The fees would be pooled and leveraged with other
available funding to develop housing affordable to lower-income households, most likely through
the auspices of non-profit, community-based development organizations. The revised program
would also allow developers to include affordable units in their projects, build affordable units on
another site or perform other actions that assist the development of affordable housing. This
approach resembles the City's fee program to mitigate the housing impacts of commercial office
development, which has been in place since 1984.3
In summary, the recommended program has the following general features:
■ Development Fee. Developers of market rate multi -family projects (i.e., two or more
units), may elect to pay an affordable housing development fee to the City, assessed on a
per -gross square foot basis.
■ Base Fee Amounts. Base fees will be established by Resolution of the City Council, after
considering, among other factors, the feasibility of the base fee for typical market rate
multi -family development projects (i.e., "constraints" analysis) and the nexus (or
relationship) between new market rate multi -family development and the need for
affordable housing.
Fee Reductions as Incentive to Avoid Tenant Displacement. Because it is City policy to
reduce adverse impacts of new development on the City's supply of existing rental
Ordinance 1615 (CCS), adopted March 3, 1992, and subsequently amended by Ordinance 1657 (CCS),
November 17, 992, collectively chaptered as Santa Monica Municipal Code (SMMC) § 9.28.010 et seq. The
Inclusionary Housing Program also includes a set of implementation guidelines approved by the City Council on
December 14, 1993.
3 Project Mitigation Measures, City of Santa Monica Land Use and Circulation Eleinents, October 23, 1984,
at pp. 155-156; and SMMC § 9.04.10.12, et. seq.
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Purpose and Scope
housing, and particularly rentals that are affordable to lower-income households, the fee
will be reduced for multi -family projects in the following circumstances:
-- Vacant sites in multi -family districts.
Sites in commercial or industrial zoning districts where multi -family development
is a permitted use and the site is not already developed with multi -family units.
On -Site Affordable Housing Production Option. As an alternative to paying an affordable
housing development fee, the developer of a new market rate multi -family project may
elect to include units affordable to lower-income households in the project. The number
of such units must match the minimum thresholds needed to qualify for the State -
mandated density bonus (i.e., 10% affordable at 50% or less of the Median Family Income
(WI), or 20% affordable at up to 60% of the MFI). The program includes further
specifications about the on-site affordable units (e.g., qualifying household incomes and
minimum unit sizes).
Other Affordable Housing Production Options. Developers may also choose to perform
other actions which assist in the production of affordable housing, such as off-site
construction of affordable units within one-half mile of the market -rate project, purchasing
or optioning land for, or assisting with the financing of, affordable housing development
by others. The details of these alternatives will be specified in program implementation
guidelines to be approved by Resolution of the City Council_
The recommended program seeks to meet the requirements of Proposition R and other
adopted City housing policies and State law, responds to a number of problems with the current
Ordinance 1615 approach, and reflects consideration of comment themes that emerged over the
past six months as a half dozen conceptual alternatives to Ordinance 1615 were aired in public
workshops and hearings.
2. The Public Purpose Underlying the Affordable Housing Production Program
Ever since the adoption of its first contemporary Housing Element in 1983,4 the City has
had a policy requiring developers of new market -rate multi -family units to provide, or assist in the
development of, units that are affordable to low- and moderate -income households as one of
several mechanisms for maintaining balance in the City's household income profile. The adopted
4 City of Santa Monica, Housing Element Policy Report, January 1983, at pp. 73-76 (adopted as the Housing
Element of the General Plan by Resolution 6620 (CCS), January 25, 1983).
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Purpose and Scope
Housing Element Update reaffirms this policy. The public purpose underlying the proposed
Affordable Housing Production Program is based on the following laws and policies:
The Consumption Patterns of the Upper Income Households Who Occupy New Market
Rate Multi Family Housing Create a Need for Affordable Housing in the City.
Households create demand for goods and services, in the private sector (e.g., retail goods
and medical services) and in the public sector (teachers and municipal services). The
higher the household income, the more demand is created. New market rate multi -family
housing in Santa Monica accommodates upper-income households almost exclusively,
because of the high cost of rent or purchase price required to occupy it. Supplying goods
and services sufficient to meet Santa Monica's share of the demand created by upper-
income households in new market rate multi -family housing requires workers across the
pay scale spectrum, including lower -wage employees. New market rate multi -family
development is, therefore, causally related to a need for housing that is affordable to
lower -wage workers.
■ State Law Establishes a Need for the City to Accommodate Its Regional Fair Share of
Low- and Moderate -Income Households. California's Housing Element law requires that
each city and county develop local housing programs designed to address its "fair share"
of existing and future housing needs for all income groups, as determined by the
jurisdiction's Council of Governments, when preparing the State -mandated Housing
Element of its General Plan.' The fair share allocation for Santa Monica is usually
determined by the Southern California Association of Governments, but in the absence of
State funding to prepare the allocation for the 1998-2003 planning period, Santa Monica
estimated what share SCAG would have assigned it. The City's 1998-2003 Housing
Element Update estimates that a SCAG assignment would probably be 3,219 additional
housing units over the five-year planning period, of which 1,936 (60%) units should be
affordable to low- and moderate -income households.' For various reasons articulated in
the Housing Element Update, the City instead uses a "quantified objective" of 1,542 units,
of which 734 (48%) are intended for low- and moderate -income households.'
S Calif. Govt. Code §§ 65580, 65581(a) and 65584.
Id., at pp. II -82 to II -93; p. V-5
Id., at p. V-6.
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Purpose and Scope
Recent Changes in State Law and Federal Laws and Housing Programs Inhibit the City's
Ability to Fulfill State Mandates and Local Policies Concerning Household Income
Diversity. As discussed at length in the Housing Element Update,' the Costa -Hawkins
Rental Housing Act of 1995 (which gradually phases out limits on the price at which
voluntarily vacated units can be re -rented initially), reductions in State and Federal funding
for housing (e.g., reductions in State and Federal budget allocations for housing
programs) and changes in these programs (e.g., reductions in the Section 8 Fair Market
Rents rendering participation in the program much less attractive to private apartment
owners) and the potential expiration of controls on rents in buildings whose development
was assisted with Federal funds, all make it much more difficult for the City to fulfill its
affordable housing goals under State law and local policy.
The Vast Majority of New Market Rate Multi Family Development is Not Affordable to
Lower Income Households. Data presented in the Housing Element Update demonstrate
that most units in new market -rate multi -family development projects are priced at levels
that are not affordable to lower-income households under applicable definitions.i6 In light
of the circumstances noted above, and absent an aggressive, multi -faceted program,
including participation by for-profit developers of multi -family housing, the cumulative
effect of new market rate multi -family projects will, over time, contribute to an imbalance
in the City's household income distribution and will interfere with the City's ability to
meet its regional fair share of housing, as established through State law (48% of all new
housing over the next five years affordable to low- and moderate -income households) and
local laws and policies (30% of new multi -family construction each year affordable to low -
and moderate -income households).
It is the Policy of the City to Maintain Income Diversity Among Its Population and
Households. According to data included in the draft Update, Santa Monica has been
successful in maintaining a balance of household incomes in the City since 1980 -- i.e.,
about 40 percent low-income, about 20 percent moderate -income and about 40 percent
9 See, for example, Housing Elenient Update, pp. II -47 to I1-64.
io For example, the 1995 Santa Monica Apartment Tenant Survey showed that median rent for apartments in
new buildings (post -1979) was $1,100 per month for a two-bedroom unit (see, Housing Element Update, Technical
Appendix), compared with a maximum rent of $731, which the City established for low-income households in a two-
bedroom unit (at 60% x WI) in 1995. Median 2 -BR condominium prices in projects constructed in the last few years
are more than twice the maximum of $66,694 established by the City as "affordable" to a low-income household (in
1997), according to our research.
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upper-income." Maintaining this balance has been accomplished by a variety of housing
programs, including rent control, a carefully designed condominium conversion program,
and use of a wide variety of local, State and Federal funding programs to assist in the
construction of new affordable housing and the preservation of existing affordable
housing. In 1990, the City's voters added Section 630 to the City Charter to require that
30 percent of all new housing development in the City be affordable to low- and
moderate -income households. The Housing Element Update continues to include goals,
policies and implementation programs to increase the supply of housing affordable to
lower-income and moderate -income households.12
■ The City Has Many Programs to Facilitate the Development and Maintenance of
Housing Affordahle to Lower -Income Households, But They Are Not Sufficient to the
Task. The Housing Element Update catalogues a dozen funding sources that the City
utilizes to assist in the development of affordable housing." Together, these resources are
projected to assist in the development of 403 new units affordable to low- and moderate -
income households. If achieved, this projection represents only 21 percent of the
estimated need for new affordable housing in the City over the same planning period,
using the SCAG need estimate, or 55 percent of the affordable portion of the City's
"quantified objective."
B. SELECTION OF THE ANALYTIC APPROACH
As noted above, recent U.S. and California Supreme Court decisions indicate that any fee
the City may impose pursuant to the proposed Affordable Housing Production Program must be
based on constitutional principles, including a factual basis for concluding that there is a
reasonable relationship, or nexus, between new market rate multi -family developments and the
need for housing affordable to low-income households.
Though the courts do not require mathematical precision, and accord local agencies
considerable deference in the approach they use for establishing nexus, particularly when the
requirement applies to a broad class of development projects, the current body of law and
11 Housing Element Update, at pp. II -13 to I1-14.
12 See, for example, Goal 2.0 (Increase the Supply of Housing Affordable to Very Low, Low and Moderate
Income Persons), its 10 related policies and I I related implementation programs. Housing Element Update, pp. V-12
to V-22.
13 Housing Element Update, Appendix F.
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Purpose and Sco e
experience on this subject suggests that certain basic themes must be considered in establishing
appropriate nexus, including: 14
■ Fee Must Be Related to the Burden Created By the Type Development on Which the Fee
is Imposed. The local agency imposing a development fee must engage in a reasoned
analysis designed to establish that there is a reasonable relationship between the amount
and use of the fee imposed and the burden created by a project, or class of projects.
Fee Must Be Related in Amount to the Cost of the Improvements Needed. The
development fee may be subject to challenge if the amount of the fee is not related to the
amount of facilities or services created by new development.
Fee May Only Reflect Prospective Impacts. The development fee may not include the
costs of remedying existing facilities or infrastructure deficiencies, but must focus on the
impacts created by new projects.
Court decisions in favor of local agencies imposing development fees have generally been
upheld when these principles have been followed and are supported by reasoned impact studies
prepared in good faith, which were relied on by the legislative body,"
1. General Approaches to Estimating the Affordable Housing Impacts of New Market
Rate Residential Development
HR&A's review of the professional literature, and initial discussions with the City Council
and City Commissioners, identified at least three general approaches that were considered in
determining how best to assess nexus between new market rate multi -family development and the
need for affordable housing and the design of an appropriate fee if nexus was found. These
alternatives are discussed below, followed by a summary of the approach ultimately selected by
14 See generally, Govt. Code § 66000, et seq. and Ehrlich v. City of Culver City 12C4th 854, 50 CR2d 242
(legislatively imposed condition not strictly subject to the tests set forth in Nollan v. California Coastal Cornrnission
107 SCt 3141 and Dolan v. City of Tigard 114 SCt 2309)
15 See for example, Commercial Builders of Northern California v. City of Sacramento 941 F2d 872
(upholding fee on non-residential building to onset burdens created by project, based on a housing impacts study); Russ
Building Partnership v. City and County of San Francisco 199 CA3d 1496, 246 CR21 (upholding fee imposed on new
office development to provide revenue for a transit system based on a detailed study).
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The Marginal Em to a ImDact of Marko! Rate Housing Consumption Spending
The City of Santa Fe, New Mexico16 and the City of Palo Alto, Californias? conducted
studies to measure the marginal impact on affordable housing attributable to each new market rate
housing development project. Using general population, household and economic data from
surveys conducted by the U.S. Bureau of the Census, and general household expenditure data
from the Bureau of Economic Analysis of the U.S. Department of Commerce, these two studies
estimate the amount of employment associated with household consumption spending in new
market rate residential development and make estimates of the number of low-income workers
and households associated with the consumption -related employment. The resulting number of
low- and moderate -income worker households were used to justify an inclusionary housing
requirement (16% in Santa Fe; 10% in Palo Alto) and fee in lieu of providing the units in new
projects. The Palo Alto study analyzed only the direct employment impacts on retail trade
employment, while the Santa Fe study produced a more comprehensive employment impact
analysis across a broad range of industry sectors, but still counted only the direct impacts, due to
limitations inherent in the national data sources used in the study
The approach and data sources used in both studies are similar to those used by the City
and County of Sacramento to justify an affordable housing fee on new commercial development,
which was sustained by the U.S. Ninth Circuit Court of Appeals. The approach used in the two
studies is also consistent with traditional impact mitigation analysis, which focuses on the marginal
effects of a proposed project. Both of these studies rely, however, on general national data, much
of it dating from early 1990s census surveys, for the statistical basis of the consumption spending -
low wage worker -affordable housing connection.
b. The Land Price Competition Approach
Another approach suggested in the literature, but apparently not yet applied in practice,
asserts that any new market rate housing development that does not include affordable housing
diminishes the amount of land available for affordable housing, and thereby burdens the remaining
land by increasing the amount of affordable housing which it will need to support." Stated
S6 Jerold Kayden and David Listokin, Report for Proposed Affordable Housing Program, City of Santa Fe,
New Mexico, October 1995.
17 Keyser Marston Assoc., Palo Alio BMR Pt ogramr, Residential Nexus: Issues and Recommrendations, City
of Palo Alto, California, April 1995. ("Palo Alto Study").
" See for example, William W. Mc►riil Ill and Robert K. Lincoln, "Linkage Fees and Fair Share Regulations;
Law and Methods," 25 Urban Lawyer 223,
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Purpose and Scope
another way, market rate housing competes with affordable housing in a market with finite land
resources, and therefore bids up the cost of land, making it increasingly expensive to build
affordable housing. If it were possible to quantify this cost premium, it could be offset with a
development fee.
This approach assumes that: 1) there is a finite amount of land available for residential
development; 2) the principal reason that land prices escalate is the competition between market
rate and affordable development; and 3) but for market rate development, affordable housing
would be constructed. It is difficult to support any of these assumptions in the Santa Monica
context. First, the supply of land for residential development may be theoretically finite, but it
would be extremely difficult to prove. This is because the City now permits residential
development in all of its commercial and many industrial districts. Market support for such
housing is largely untested, and therefore it is uncertain how much of the theoretical buildout
should be counted as part of the supply, particularly when the relative attractiveness of residential
development as against non-residential development on any given site changes over time in
response to market conditions and land use regulations.19
Second, Santa Monica land prices respond to a wide variety of market forces, and not just
the competition for what kind of housing to build. For example, any recent run-up in multi -family
land prices has a lot to do with the partial deregulation in rents mandated by the Costa -Hawkins
Rental Housing Act, and not much to do with new development, of which there has been very
little since the late 1980s.
Third, even if land were cheaper, the ability to build affordable housing would still be
extremely limited by the lack of other financial resources to pay for all of the other development
costs. One need only look to other parts of Los Angeles County outside the coastal communities,
where land is considerably less expensive, but affordable housing is not significantly more
plentiful.
Replacement ofDemolished Aff rdable Units
In response to more local concerns, it has also been suggested that affordable housing
nexus could be based on the fact that new market rate multi -family developments sometimes
include the demolition of units that are affordable to low- and moderate -income households.
Accordingly, it has been suggested, developers should be charges a fee based on the number of
affordable units removed. The law may preclude this approach on several grounds.
19 This is precisely the reason that the City of San Francisco reportedly rejected using this approach. (Palo
Alto Study, at p, 8.)
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Purpose and Scope
For example, the replacement approach may be in conflict with laws which restrict the
City's ability to impose additional costs on new projects undertaken pursuant to the State Ellis
Act. In a San Francisco case involving single -room occupancy hotel projects,20 the Court of
Appeals invalidated a provision in a San Francisco ordinance that required owners of residential
hotel units to obtain a permit from the City before the units could be converted to tourist use.
The permit would only be issued if the owner agreed to provide ane -for -one replacement of the
converted units either by constructing replacement units or by paying an in -lieu fee equal to 40
percent of replacement costs. The Bullock court concluded that the Ellis Act prohibited San
Francisco's attempt to require an in -lieu fee. In June, 1989, the City adopted an ordinance putting
property owners on notice that they may be required to comply with a requirement to replace
units demolished as a result of an Ellis Act withdrawal, or pay an in lieu fee.21 A fee ranging from
$38,000 for each one -bedroom unit to $63,000 for a four-bedroom unit was under discussion. In
1991, the "notice" ordinance was repealed and the one-for-one replacement or in lieu fee
requirement was suspended in light of the Bullock decision," On the other hand, the City imposes
a tenant relocation requirement for lower-income households.23
2. The Selected Analytic Approach
For the reasons noted above, ER&A determined that the marginal impact approach was
the most reasonable method for estimating the affordable housing impacts of new market rate
multi -family development, and the method that yields most directly a development fee that is
proportional to impacts. The approach reported here improves on previous marginal impact
analyses by using more sophisticated analytic tools capable of measuring the employment effects
of high-income household expenditures as they ripple through the local economy, and how this
translates into demand for affordable housing, all specific to the regional economy in which Santa
Monica is situated.
In summary, the analysis approach is as follows. Each new market rate multi -family
development project constructed and occupied in the City adds new households with particular
income and spending characteristics. These households create demand for goods and services, in
the private sector (e.g., restaurants, retail goods and medical services) and in the public sector
(teachers and municipal services). In general, the higher a household's income, the more dollars
20 Bullock v. City and County of Sat: Francisco, 221 Cal. App. 3d 1072, 271 Cal. Rptr. 44
21 Ordinance 1486 (CCS), adopted June 27, 1989.
22 Ordinance 1576 (CCS), adopted March 26, 1991,
23 SMMC Chapter 4.36.
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Purpose and Scope
are spent for goods and services. New market rate multi -family housing in Santa Monica
accommodates upper-income households almost exclusively, because of the high cost of rent or
purchase price required to occupy it. Supplying goods and services sufficient to meet the
consumption demand from upper-income households in new market rate multi -family housing
requires workers across the pay scale spectrum, including lower -wage employees. Some of these
lower -wage workers are members of low-income households who require housing at prices they
can afford. New market rate multi -family development is, therefore, causally related to a demand
for housing that is affordable to lower -wage workers and their households. Therefore, the City
may require that developers provide part of the cost of meeting the affordable housing demand
generated by their projects, through payment of an affordable housing fee, should they elect this
option under the proposed new City program.
C. ORGANIZATION OF THE REPORT
Estimating the marginal affordable housing demand caused by new market rate multi-
family developments in Santa Monica, and a development fee that is roughly proportional to this
impact, was determined through a four-part analysis, as presented in each of the following
Chapters.
The remaining Chapters of this Report are as follows:
Household Income and Spending in New Market Rate Multi Family Developments.
Chapter III presents estimates of the income and spending characteristics of households
who will occupy typical new market rate multi -family developments. The analysis uses
four prototypical market rate multi -family projects -- two apartment and two
condominium projects; one of each developed in a lower-cost subarea of the City and a
higher -cost subarea of the City. Based on the rents and purchase prices needed to achieve
financially viable developments, it is possible to deduce the incomes of the households
who will occupy the units. The proportion of total household and total per -prototypical
project spending for goods and services is then estimated.
Tlie Consumption Related Employment Impacts of New Market Rate Multi Family
Development. Chapter IV explains how the IMPLAN input-output model for the
economy of Los Angeles County was used to estimate the total employment -- direct,
indirect and induced -- that is generated by per -prototype household expenditures for
goods and services.
Tlie Affordahle Housing Impacts of Consumption -related Employment. Chapter V
explains how data available from the 1990 census were used to derive the subset of total
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Purpose and Sca e
employment generated by per -prototype household expenditures who are low-income
workers and their number of households. This result constitutes the estimate of affordable
housing demand generated by the new market rate multi -family development prototypes in
the City.
Estimating Justisable Development Fees. The final Chapter presents calculations for per -
prototype fees that could be charged developers of new market rate multi -family
development prototypes in the City to offset the affordable housing demand generated by
their projects. The calculation is based on the City's costs to subsidize the development of
apartments affordable to low-income households.
Several appendices include additional supporting data and information referred to in the
Report.
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III. HOUSEHOLD INCOME AND SPENDING IN
NEW MARKET RATE MULTI -FAMILY DEVELOPMENTS
Detailed analysis of the financial circumstances of typical new apartment and
condominium projects developed in the City that was prepared for the recent Housing Element
Update demonstrates that developers must charge high rents or purchase prices in order to earn a
financial return sufficient to justify the investment. The households who can afford to pay these
levels of rent or purchased housing costs are, by most any definition, upper-income households.
Upper-income households expend a significant portion of their incomes for goods and services
obtained from private and public sector resources. This Chapter presents the basis for the
estimates of per -household income and spending, and how these were aggregated for typical new
multi -family developments in Santa Monica.
A. ESTIMATING TOTAL HOUSEHOLD INCOME IN TYPICAL NEW MARKET
RATE MULTI -FAMILY DEVELOPMENTS
The first step in establishing the marginal demand for affordable housing from typical new
market rate multi -family developments in the City requires defining those typical projects,
estimating total per -project household incomes and the amount of income generally available for
spending on goods and services."
As noted in Chapter II, the analysis presented here focusses on the affordable housing
demand generated by the most typical new market rate multi -family developments. Based on data
contained in the Housing Element Update, most new apartment and condominium projects in the
City are developed in the R2 Medium Density Multifamily Residential District on between one
and three adjacent lots. Under current zoning regulations, this allows for apartment or
condominium projects with between five and 16 market rate dwelling units, assuming the lots abut
an alley. For purposes of this Report, HR&A selected four prototypical five -unit projects that
together represent most of the conditions under which new multi -family projects will be built in
the City in future years.
24 New market rate multi -family developments are built to meet the demand for apartments and condominiums
in Santa Monica. Some of the households who occupy these units will be in -migrants to the City or County of Los
Angeles. Other households will already be living in the City or County, but are moving to new units in Santa Monica for
any number of reasons, such as to reside in a particular neighborhood or larger dwelling unit, be closer to work, or send
their children to schools in the Santa Monica -Malibu Unified School District. While such households are not "new" to
the City or County, they free up their prior unit, often to a new in -migrant, in the act of moving. 'Thus, new market rate
multi -family development in Santa Monica is associated directly, or indirectly after a series of moves, with new
households.
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The four prototypes are:
■ Apartments in lower-cost subareas of the City, where rents and land costs are relatively
less expensive than other areas (e.g., the central part of the City between Wilshire and
Pico Boulevards).
■ Apartments in higher -cost subareas of the City, where rents and land costs are relatively
more expensive than other areas (e.g., north of Wilshire Boulevard and some parts of the
Ocean Park community).
■ Condominiums in lower-cost subareas of the City.
■ Condominiums in higher -cost subareas of the City.
Financial feasibility modeling prepared by HR&A for the Housing Element Update, and
subsequent analysis for the design of the proposed Affordable Housing Production Program, 25
estimated that rents for market rate apartments developed on sites in the City's R2 multi -family
residential district must average between about $2,100 and $2,600, depending on the submarket
area of the City to meet generally acceptable levels of financial return to the developer. If these
returns are not available, developers will build elsewhere or pursue other forms of investment.
The range accounts for both the size of the project and the submarket area of the City in which it
is located, as shown in Table III -1.
25 See generally, HR&A, "Recommendations for Revising the City of Santa Monica's Inclusionary Housing
Program," memorandum to Santa Monica Housing Manager Robert Moncrief, dated April 6, 1998, pp. 20-24 and
Appendix D.
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Household Income and Spending
Table III -1
RENTS REQUIRED FOR FINANCIALLY "FEASIBLE" NEW MARKET RATE
APARTMENT DEVELOPMENT IN THE R2 DISTRICT, CITY OF SANTA MONICA
Market Subarea
and Prototype Size
Lower -Cost Area
1 -Lot Project
3 -Lot Project
Average
Total Development Development Cost
Cost Per Unit
$1,237,484 $247497
$3,536,640 $221,040
Higher -Cost Area
1 -Lot Project $1,593,134
3 -Lot Project $4,613,111
Average
Monthly Rent
Required to
Achieve Threshold
Return '
$2169
$1965
$2,067
$318,627 $2,718
$288,319 $2,535
$ 2,627
Cash -on -cash return of 15% in the first stabilized year of operation.
The average income of the households occupying units in each prototype can be deduced
from assumptions about the proportion of total household income spent for rent. HR&A's 1995
survey of households residing in newly constructed apartments exempt from rent control found
that rent for such units represents, on average, 37 percent of household income.2' This is higher
than the conventional threshold assumed for affordable housing programs (i.e., 30 percent of
income) and higher than the ratio implied by 1990 census data (90% of households with incomes
over $50,000 paid less than 20% of household income for rent in 1989).27 The 30 percent ratio is
a planning target, and does not necessarily represent what household actually are willing to spend
for the housing accommodation of their choice. The 1990 census data is a blend of households in
controlled and uncontrolled rental units. Because upper-income households occupy a share of
rent -controlled units,28 and therefore pay below-market rents, their ratio of rent to income is not
26 See, HR&A, "Results of the 1995 Santa Monica Apartment Tenants Survey," Housing Element Update,
Technical Appendix. Table 11 shows that 55% of households in uncontrolled apartments, which are primarily units
constructed after April 1979, paid between 30% and 50% of their incomes for rent. The median calculated from the
survey data is 37%.
27 See, U.S. Bureau of the Census, 1990 Census of Population and Housing, City of Santa Monica, Summary
Tape File 3, Table H-50.
29 Overall, about 25% of rent controlled units in the City were occupied by households with incomes
exceeding 120% of the County median in 1995. This ranges from 18% in the downtown/Mid-City area to 31% north of
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representative of the situation in newly constructed apartments, which are exempt from rent
control. Therefore, the 37 percent rent -to -income ratio was used for this analysis.29 It implies
that, on average, households paying the rent needed to justify development of prototypical new
market rate apartment projects in the City must have incomes of between about $67,000 and
$85,000 per year. This calculation, together with the results from alternative rent -to -income ratio
assumptions, are shown in Table III -2.
Using per -household income based on the 37 percent rent -to -income ratio implies that the
typical five -unit apartment development includes total household income of between about
$335,000 and $426,000.
Analysis conducted by HR&A for the design of the Affordable Housing Production
Program also found that the average purchase price for new condominiums needs to be in a range
of $316,000 to $418,000, again depending on the submarket area of the City, in order for
developers of typical projects to achieve acceptable returns, as shown in Table III -3.
Wilshire Boulevard, Id., pp. 27-28.
29 The implications of using alternative rent -to -income ratios for a justifiable development fee are discussed in
Chapter V.
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Table III -2
HOUSEHOLD INCOMES IN PROTOTYPICAL NEW APARTMENT DEVELOPMENTS
IMPLIED BY VARIOUS RENT -TO -INCOME RATIOS
Prototype
Average Rent
Rent -to -Income Ratios
37%
35%
30%
20%
Lower -Cost Area
1 -Lot Project
$70,346
$74,366
$86,760
$130,140
3 -Lot Project
$63,730
$67,371
$78,600
$117,900
Average
$67,038
$70,869
$82,680
$124,020
Per -Prototype
$335,189
$354,343
$413,400
$620,100
Higher -Cost Area
1 -Lot Project
$88,151
$93,189
$108,720
$163,080
3 -Lot Project
$82,216
$86,914
$101,400
$152,100
Average
$85,184
$90,051
$105,060
$157,590
Per -Prototype
*425,919
$450,257
$525,300
$787,950
Using per -household income based on the 37 percent rent -to -income ratio implies that the
typical five -unit apartment development includes total household income of between about
$335,000 and $426,000.
Analysis conducted by HR&A for the design of the Affordable Housing Production
Program also found that the average purchase price for new condominiums needs to be in a range
of $316,000 to $418,000, again depending on the submarket area of the City, in order for
developers of typical projects to achieve acceptable returns, as shown in Table III -3.
Wilshire Boulevard, Id., pp. 27-28.
29 The implications of using alternative rent -to -income ratios for a justifiable development fee are discussed in
Chapter V.
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Household Income and S endin
Table III -3
PURCHASE PRICE REQUIRED FOR FINANCIALLY "FEASIBLE" NEW MARKET
RATE CONDOMINIUM DEVELOPMENT IN THE R2 DISTRICT,
CITY OF SANTA MONICA
Market Subarea Total Development Development Cost Purchase Price
and Prototype Size Cost Per Unit Required to
Achieve Threshold
Return '
Lower -Cost Area
1 -Lot Project $1,465,227 $293,045 $341,775
3 -Lot Project $4,096,789 $256,049 $290,509
Average $316,142
Higher -Cost Area
1 -Lot Project $1,841,891
3-Lat Project $5,331,732
Average
$368,378 $445,067
$333,233 $391,617
$ 418,342
' Cumulative return on equity of 50% at project sell-out.
Deriving an estimate of per -project household income for the condominium prototypes
requires several additional assumptions, due to the nature of purchased housing. These include
the amount of the down payment (20% is assumed), the mortgage term and interest rate (30 years
at 7.00%), estimates of property taxes (1.05% x purchase price less homeowner's exemption),
estimates of property insurance ($100 per month) and average homeowner's association dues
($208 per month). The sum of these costs should not exceed about 3 5 percent of total household
income, according to conventional residential lending criteria. Using the sum of these costs and
this threshold yields and estimate of between about $78,000 and $99,000 per household, or
$388,000 to $496,000 of total per -project household income, as shown in the lower half of Table
III -4 on the following page.
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SaMONexM(Ine,)ds Page 24 HRBA, Inc. MOO
Table 111-4
Estimates of Average Annual
Per-Househotd and Per -Project Incomes In Four Prototypical New Market Rate Multi -Family Developments
In the City of Santa Monica
Assumptions. 1.
5 -unit projects, typical of development in the R2 District
2,
4 Protoypes, based on protoypes per financial feasibility models
Apartment -- Lower -Cost Area (average of one -lot and three -lot prototypes)
Apartment -- Higher -Cost Area (average of one -tot and three -lot prototypes)
Condominium -- Lower -Cost Area (average of one -lot and three -lot prototypes)
Condominium -- Lower -Cost Area (average of one -lot and three -lot prototypes)
3.
Apartment rents and condo purchase prices set at rates required to earn threshold returns, per feasibility models
4.
Apartment Rent= 37% x Household Income per 1995 Tenant Survey results for uncontrolled rental housing
Condo Owners' Cost (mortgage, property tax, insurance and Homeowners Association dues) = 35%x Household Income
Prototype #1
Apartment -- Lower -Cost Area (average of one -lot and three -dot prototypes)
1 -Lot 3 -Lots Average
Avg, Unit Size (GSF)
1,339 1,441 1,390
Monthly RenUGSF
$ 1.62 $ 1.36 $ 1.49
Monthly Rent
$ 2,159 $ 1,965 $ 2,067
Annual Rent
$ 26,028 $ 23,560
RentlHHld Income
37.00% 37.00°%
Annual Hhld Income
$ 70,346 $ 63,730 $ 57,038
# Units/Project
5
Project Hhld. Income
IS335,1891
Prototype #2
Apartment -- Nigher -Cost Area (average of one -lot and three -lot prototypes)
1 -Lot 3 -Lots Average
Avg. Unit Size (GSF)
1,339 1,441 1,390
Monthly RentlGSF
$ 2.03 $ 1.76 $ 1.89
Monthly Rent
$ 2,718 $ 2,535 $ 2,627
Annual Rent
$ 32,616 $ 30,420
RentlHHid Income
37.00°% 37.00°%
Annual Hhld Income
$ 88,151 $ 82,216 $ 85,184
# UnKslProject
5
Project Hhld. Income
1$425,9191
Prototype #3
Condominium - Lower -Cost Area (average of one -lot and three -lot prototypes)
1 -Lot 3 -Lots Average
Avg. Unit Size (GSF)
1,519 1,424 1,472
Purchase PrIcefGSF
$ 225 $ 204 $ 215
Purchase Price
$ 341,775 $ 290,509 $316,142
Mortgage %
80.00°% 80.00%
Mortgage Pmt./Mo.
$1,819 $1,546
Prop. Tax Rate
1.05°% 1.05°%
Homeowner's Deduct.
$ 7,000 $ 7,000
Property TaxfYr.
$ 3,515 $ 2,977
Property TaxlMo.
$ 293 $ 248
Property Insurance/Mo.
$ 100 $ 100
HOA Dues/Mo.
$ 208 $ 208
Total Housing Costs/Mo.
$ 2,420 $ 2,103
Total Housing Costs/Yr.
$ 29,044 $ 25,231
Housing Costs/Hhld Income
35.00°% 35.00°%
Annual Household Income
$ 62,983 $ 72,090 $ 77,535
# Units/Project
5
Project Hhld. Income
1$,387,68
Prototype #4
Condominium -- Nigher -Cost Area (average of one -lot and three -lot prototypes)
1 -Lot 3 -Lots Average
Avg. Unit Size (GSF)
1,519 1,424 1,472
Purchase Price/GSF
$ 293 $ 275 $ 284
Purchase Price
$ 445,057 $ 391,617 $418,342
Mortgage °%
80.00°% 80.00%
Mortgage Pmt./Mo.
$2,369 $2,084
Prop. Tax Rate
1.05% 1.05°%
Homeowners Deduct.
$ 7,000 $ 7,000
Property TaxfYr.
$ 4,600 $ 4,038
PropertyTax/Mo.
$ 383 $ 337
Property Insurance/Mo.
$ 100 $ 100
HOA DueslMo.
$ 208 $ 208
Total Housing CostslMo,
$ 3,060 $ 2,729
Total Housing CostslYr.
$ 36,726 $ 32,751
Housing Costs/Hhld Income
35.00% 35.00%
Annual Household Income
$ 104,931 $ 93,573 $ 99,252
# Units/Project
5
Project Hhld. Income
r$-4-96,-2-601
SaMONexM(Ine,)ds Page 24 HRBA, Inc. MOO
Household Income and S endin
B. ESTIMATING TOTAL HOUSEHOLD SPENDING FOR GOODS AND
SERVICES IN TYPICAL NEW MARKET RATE MULTI -FAMILY
DEVELOPMENTS
Households in new market rate multi -family developments use their incomes to pay taxes,
save for the future and purchase goods and services, including housing costs. Goods and services
are provided by the public sector -- e.g., public safety, cultural and recreational, library and
educational services -- and private sector -- e.g., groceries, clothing, medical services and
domestic help. The amount and pattern of goods and services consumption varies by level of
household income. Upper-income households, like those who will occupy new market rate multi-
family developments in the City, have more to spend and spend it on more discretionary items
than households of more modest means. Because consumption -related expenditures are a crucial
element of the national economy, data about them is tracked on a regular basis by the Bureau of
Economic Analysis ("BEA") of U.S. Department of Commerce and the Bureau of Labor Statistics
("BLS") of the U.S. Department of Labor. The BEA measures the relationship between total
personal income and personal consumption expenditures on a national basis; the BLS sponsors
regular surveys to measure consumer expenditures by category, region of the nation and income
level.
In this Chapter, BEA data are used to estimate the portion of total household income in
the four new market rate multi -family development prototypes that is available, on average for
purchase of goods and services, including housing costs. The BLS data are used in the IMPLAN
input-output model, described in the next Chapter, to account for the employment associated with
the particular spending characteristics of upper-income households.
Table III -5 shows that, on average, about 75.5 percent of total household income is
available for consumption expenditures, including housing costs. The remainder is attributable to
taxes, social insurance contributions (e.g., wage earner's share of payments into Social Security),
savings and consumer interest.
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Householdlncome ands endin
Applying this consumption expenditure percentage to total per -prototype household
income means that typical five -unit market rate apartment and condominium projects generate
between $253,000 and $375,000 in annual spending on goods and services, as shown in Table III -
6.
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Table III -5
PERSONAL INCOME AND
ITS DISPOSITION IN THE U.S., 1995
Item
Amount
Percent
($billions)
Personal Income
Less Taxes
Less Social Insurance Contribution
Adjusted Personal Income
$6,112.4
-794.3
-294.5
$5,023.6
100.0%
-13.0%
-4.8%
82.2%
Disposable Income
(including Social Insurance Contribution)
Less Savings
Less Consumer Interest
Less Foreign Transfers
$5,318.1
-246.6
-131.7
_ 14.9
$4,924.9
100.0
-4.6%
-2.5%
-0.3°%
92.6°%
Net Disposable Income
Personal Consumption Expenditures (PCE)
75.5%
(Adjusted Personal Income x Net Disposable
Income)
Applying this consumption expenditure percentage to total per -prototype household
income means that typical five -unit market rate apartment and condominium projects generate
between $253,000 and $375,000 in annual spending on goods and services, as shown in Table III -
6.
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Household Income and S endln
Table 111-6
TOTAL ANNUAL HOUSEHOLD INCOME AND CONSUMPTION EXPENDITURES FOR FOUR
PROTOTYPICAL 5 -UNIT NEW MARKET RATE MULTI -FAMILY DEVELOPMENTS
IN THE CITY OF SANTA MONICA
Prototype Per -Household Per -Prototype
Per -Prototype Average
Average Annual Average Annual
Annual Consumption
IncomeHousehold Income 2
Expenditures s
Apt. (Lower -Cost Area) 67,038 335,189
253,068
Apt. (Higher -Cost Area) 85,184 425,919
321,569
Condo (Lower -Cost Area) 77,536 387,681
292,699
Condo (Higher -Cost Area) 99,252 496,260
374,676
' From Table 111-4.
2 Per -Household Average Annual Income x 5 units per prototype.
75.5% x Per -Prototype Average Annual Household Income.
The next Chapter analyzes the types and amount of employment needed in public sector
organizations and private sector businesses to meet the demand from annual consumption
spending by the five households in each prototypical new market rate multi -family development.
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IN. THE CONSUMPTION -RELATED EMPLOYMENT
AND EMPLOYEE AFFORDABLE HOUSING IMPACTS OF
NEW MARKET RATE MULTI -FAMILY DEVELOPMENT
This Chapter describes how the MLAN input-output model for the economy of Los
Angeles County was used to estimate the total employment impacts of consumption -related
spending by households in typical market rate multi -family projects. But, not all of these workers
are lower-income, and only some of these are members of households that meet the definition of a
"low-income"-- i.e., earning up to 60 percent of the Los Angeles County median income, or about
$25,000 per year for a two -person household. Deriving the subset of households meeting these
criteria was accomplished using the Public Use Microdata Sample (PDMS) for Los Angeles
County, a specialized scientific sample of 1990 census data. This Chapter describes the PDMS
data set and how it was used to derive the estimates of the affordable housing needed to
accommodate employees whose jobs result from consumption expenditures by households in new
market rate multi -family developments in Santa Monica.
A. MARGINAL EMPLOYMENT IMPACTS GENERATED FROM CONSUMPTION
EXPENDITURES BY HOUSEHOLDS IN NEW MARKET RATE MULTI-
FAMILY
ULTIFAMILY DEVELOPMENTS IN SANTA MONICA
1. Overview of Input -Output Modeling and the IMPLAN Model
Input-output analysis is a method for understanding the economic interactions within an
economy, both between businesses and between businesses and consumers. It captures all
monetary market transactions for consumption in a given period of time. The resulting
mathematical formulae can be used to measure the effects of a change in one or more economic
activities on an entire region, including the output, income and employment impacts of a plan,
policy or level of new investment. It measures not only the total amount of impact, but also the
particular sectors of the economy in which the change exerts the most influence.
In form, an input-output model resembles a giant matrix, or spreadsheet, composed of
three distinct tables:
Input -Output Table. The input-output table (or flow of transaction table) establishes the
relationships between each industry and its suppliers, or between a household and the
producers of household goods and services. In consists of a table of all of the output sales
by each sector to itself and all other sectors, including households, and of all the input
purchases made by each sector from itself and every other sector, again including
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Employment and Em to ee Housing Impacts
households. "Inflows" of goods and services needed by an industry (i.e., the purchasing
sectors) are the matrix columns and the rows consist of the "outputs", or selling sectors.
Technical Cosi Coefficient Table. This is derived from the input-output table. Each cell
in a purchasing sector (i.e., a matrix column) represents the dollar value of the input from
a selling sector (Le., matrix row) that goes into the production of a dollar's worth of
output in that particular purchasing sector.
Inverse Matrix. This is derived from the technical cost coefficient table using matrix
algebra. Each cell in a purchasing sector indicates the dollar value of the total change in
the selling sector that is needed to meet a dollar's worth of change in the purchasing
sector's output, after the entire economy has adjusted to the initial change. Because most
inverse matrices are derived from dollar flow tables, total impacts computed from the
matrices are expressed in dollar terms. If, on the other hand, the tables are based on
physical labor inputs, the values are expressed in terms of jobs.
The combination of these three tables makes it possible to determine which sectors of an
area's economy are affected, and by how much, when a dollar's worth of change, or "final
demand," such as new household spending, is added to a particular sector or sectors of the
economy. Input-output models are used throughout the world. Most such models created in the
U.S. are based on the trade flow relationships contained in the input-output model created for the
national economy by the Bureau of Economic Analysis.30
Although they are very powerful and widely used analysis tools, there are some important
limitations to input-output models that should be kept in mind when evaluating the model results.
First, the inter -industry relationships on which they are based necessarily derive from historical
experience that may no longer be accurate for the current economy, particularly when the
economy has been subjected to profound changes like those of the past decade. Second, the
input-output model is a snapshot of the economic performance of an area, when in reality, a local
economy is in a constant state of reaction to internal and external changes.
IMPLAN (IMpact analysis for PLANning) is one widely used input-output model used
across the nation to assess the economic impacts of programs, policies and projects. IMPLAN
was originally developed by the U.S. Forest Service, the Federal Emergency Management Agency
and the Bureau of Land Management to assist in federal land and resource management planning.
It has evolved from a mainframe, non -interactive application that ran in "batch" mode to a menu -
30 See generally, U.S. Dept. Of Commerce, Bureau of Economic Analysis, The 1982 Input -Output Structure
of the U.S. Economy, Washington D.C., 1992. Annual input-output tables are published by BEA.
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Employment and Employee Housing Im acts
driven microcomputer program that is completely interactive." The data used in the IMPLAN
models derive from the economic censuses prepared by the U.S. Bureau of the Census and
various BLS studies. Models were created for the nation, each state and counties within states,
all of which are internally consistent and controlled to the national economy. National -level data
are adjusted with state- and county -specific data to tailor the trade flow assumptions to each area.
Employment data are derived from reports provided by every county and state to the Bureau of
Labor Statistics as part of the national unemployment insurance program operated by the states.
These data include average annual wage and salary information, establishment counts, employee
counts and payrolls. Other data are used to account for employees who are not covered by
unemployment insurance (e.g., self-employed persons).
Today, "LAN is used for the preparation of economic impact analyses by many public
and private agencies, including the California Department of Finance. Locally, it has been used,
for example, to estimate the economic impacts of a major hospital campus reconstruction plan," a
professional hockey and basketball stadium proposed for a site adjacent to the Convention Center
in the Los Angeles Central Business District,33 a plan to add 10 million square feet of new office
and other commercial development around Union Station,34 and Universal Studios' proposal to
increase the intensity of development at Universal City, home of Universal Studio Hollywood,
CityWalk and the world headquarters of Universal's film and television production facilities.35
The IMPLAN model is similar to RIMS II, another popular input-output model developed
by the U.S. Bureau of Economic Analysis, in terms of its basic structure, availability at the county
scale of geography, and data sources. The principal difference is that IMPLAN is a
31 Minnesota IMPLAN Cnoup, IMPLANProfessional, Social Accounting & Impact Analysis Software, 1996.
32 Hamilton, Rabinovitz & Alschuler, Inc., Estimates of the Economic and Tax Revenue Impacts of the Saint
John's Health Center and the Health Center's Campus Master Plan, November 17, 1997.
33 Price -Waterhouse, Economic and Fiscal Impact Analysis for the Proposed Los Angeles Arena, prepared
for the Community Redevelopment Agency of the City of Los Angeles, October 1996.
34 Hamilton, Rabinovitz & Alschuler, Inc., The Employment, Housing and Population Impacts of the
Alameda District Plan, 1995. This Report is a Technical Appendix to the project's Final Environmental Impact Report,
which was certified by the Los Angeles City Council in 1996.
35 Hamilton, Rabinovitz & Alschuler, Inc., The Economic and Fiscal Impacts of the Universal City Specific
Plan, Draft, December 1996. Data from this analysis was also used in I R&A's analyses of the employment, housing,
population and public schools impacts of the project, which are included as Technical Appendices to the project's Draft
EIR now in public review.
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Employment and Employee Housing Impacts
microcomputer based mode136 that allows the analyst to generate more detailed project -specific
impact analyses, including estimates of direct, indirect and induced impacts, and to modify default
data derived from national relationships if more specific local data are available. Estimates of
employment impacts are derived by entering a measure of new economic activity, called "final
demand," into the appropriate MWLAN industry sectors. IMPLAN then traces the effect of that
new economic activity through every other sector of the economy. In the case of new household
spending, IlVIPLAN allocates personal consumption expenditures to industry sectors consistent
with national personal consumption expenditure patterns derived from annual spending surveys,
and uses one of three income -level specific distribution patterns (i.e., low-, middle- and high-
income). The 528 industry sectors in the EVIPLAN model, like the national input-output model
on which it is based, are composites of Standard Industrial Classifications (SIC), the nation's
official system for classifying businesses by their activity or product.
Each industry that produces goods and services generates demands for other goods and
services. These iterations in the economy are described by "multipliers." IMPLAN measures
three categories of economic impact, which together capture the complete "multiplier effect" of
new economic activity in an area, such as new spending by upper-income households who occupy
new market rate multi -family development projects in Santa Monica. These impact categories are
as follows:
Directlmpacts. These include all jobs, earnings (i.e., wages and benefits) and total
economic output (a local version of the gross domestic product) created directly from new
household spending for goods and services, which economists refer to as "final demand."
Indirect Impacts. Indirect impacts are created by business purchases of goods and
services that are used as inputs to meet final demand. These include, for example, jobs and
earnings associated with the production of goods sold at retail.
Induced Impacts. Induced impacts are created by direct and indirect employee spending
for a variety of household goods and services. These impacts, including still other jobs,
earnings and economic output, will most likely occur near the homes of the direct and
indirect employees. These impacts are associated with a wide variety of convenience
goods (e.g., banks and supermarkets), comparison shopping goods (e.g., car dealers,
household appliances and furniture stores) and services.
36 See generally, Minnesota IMPLAN Group, Inc., IMPLANProfessional, Social Accounting and Impact
Analysis Software, 1996.
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Employment and Employee Housing Impacts
For the analysis reported here, an IMPLAN model of the Los Angeles County economy as
of 1996 (the latest model year) was used. The County is used because it is a functional economic
area. That is, it is a self-sufficient economic unit that includes most of the places where people
live, work and shop, most of the businesses that supply goods and services to other businesses,
and the travel corridors that connect businesses and consumers. Although IMPLAN can be used
for smaller geographic areas, such as the City, doing so would not capture all of the trade flow
relationships of consumer spending by households in new market rate multi -family developments.
2. IMPLAN Estimates of Marginal Employment Impacts
As noted in Chapter III, the U.S. Bureau of Labor Statistics {"BLS") sponsors the
Consumer Expenditure Survey program. The surveys, conducted for BLS by the Bureau of the
Census, track the buying habits of American consumers through its Consumer Expenditure
Survey. These are the same surveys that are used, in part, to establish the Consumer Price Index.
The survey program has two components. The first is an interview panel survey in which the
expenditures of consumers are obtained during five interviews conducted every three months.
The second is a diary completed by participating households for two consecutive one-week
periods, which tracks expenditures on small, frequently purchased items which are not always
captured precisely in the interviews. The two surveys query independent samples of consumers
that are representative of the national population. Data are collected in 88 urban and 16 rural
areas of the country. Data from the two surveys are then integrated, and are reported for various
geographic areas of the nation, income group and other characteristics.
The IMPLAN model relies on these data and translates the BLS data's consumer unit
values into household values, using U.S. census and other data. RMIPLAN provides impact data
for three household income categories: 1) low-income (less than $20,000); 2) middle-income
($20,000-$50,000); and 3) high-income (over $50,000). Because the average household incomes
in new market rate multi -family developments in Santa Monica all exceed $50,000, the "high-
income" consumption expenditure patterns in the IMPLAN model were used.
Entering the estimate of total per -prototype household consumption expenditures into the
EVIPLAN model, using the high-income household expenditure distribution pattern, results in
estimates that the consumption expenditures by upper-income households in typical new market -
rate multi -family developments in Santa Monica generate between 3.7 and 5.5 total workers,
primarily in the retail trade and services sectors of the economy. Table IV -1 shows the
distribution of direct, indirect, induced and total employment, by major industry categories, for
Prototype #2 (apartment -higher -cost area), as an example.
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The proportions of employment by industry are consistent across prototypes; the number
of employees per industry varies with the amount of consumption spending, as summarized in
Table IV -2. More detailed results from the IWLAN model are included in Appendix A.
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Table IV -1
DISTRIBUTION OF EMPLOYMENT RESULTING FROM
HOUSEHOLD CONSUMPTION
EXPENDITURES IN
LOS ANGELES COUNTY,
MARKET RATE MULTI -FAMILY PROTOTYPE #2 (APARTMENT -HIGHER COST AREA)
Direct
Indirect
Induced Jobs
Total
Major Industry Sector
Jobs
Jobs
Jobs'
Agriculture & Mining
0.01 0.2
0.01 1.3
0.01 0.4
0.02
0.4
Construction
0.00 0.1
0.06 8.2
0.02 1.6
0.08
1.6
Manufacturing
0.11 3.8
0.05 7.6
0.06 4.5
0.21
4.5
Trans p.ICommun.lUtil.
0.19 6.7
0.09 13.4
0.10 8.1
0.38
8.0
Wholesale Trade
0.04 1.4
0.00 ---
0.01 1.0
0.05
1.1
Retail Trade
1.12 39.5
0.04 5.8
0.41 32.9
1.57
33.0
Finance/lnsur./Real Est.
0.14 5.1
0.12 17.6
0.09 7.5
0.36
7.5
Services
1.02 35.9
0.28 41.8
0.47 37.8
1.77
37.3
Government
0.21 .7.a
_QJU _4-a
_QM ALZ
9-1
_fU
Total`
2.83 100.0
0.68 100.0
1.25 100.0
4.76
100.0
' Totals may not sum precisely due to independent rounding.
= Less than 0.01
Source: HR A
The proportions of employment by industry are consistent across prototypes; the number
of employees per industry varies with the amount of consumption spending, as summarized in
Table IV -2. More detailed results from the IWLAN model are included in Appendix A.
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Em to ment and Employee Housinig Impacts
Table IV- 2
TOTAL EMPLOYMENT DEMAND RESULTING FROM
TOTAL HOUSEHOLD CONSUMPTION EXPENDITURES
IN
FOUR PROTOTYPICAL MARKET RATE MULTI -FAMILY DEVELOPMENTS
IN THE CITY OF SANTA MONICA
Prototype Per -Prototype Direct Indirect
Average Annual Employees Employees
Induced
Employees
Total
Employees z
Consumption
Expenditures '
Apt. -- Lower Cost Area $253,068 2.23 0.533
1.00
3.74
Apt. - Higher Cost Area $321,569 2.83 0.68
1.25
4.76
Condo -- Lower -Cost Area $292,699 2.57 0.62
1.14
4.33
Condo - Higher -Cost Area $374,676 3.30 0.79
1.46
5.54
AVERAGE $310,503 2.73 0.65
1.21
4.59
' From Chapter 111, Table 111-6.
z May not sum precisely due to independent rounding.
B. MARGINAL AFFORDABLE HOUSING IMPACTS GENERATED FROM
CONSUMPTION EXPENDITURES BY HOUSEHOLDS IN NEW MARKET
RATE MULTI -FAMILY DEVELOPMENTS IN SANTA MONICA
1. The Public Use Microdata Sample From the 1990 U.S. Census
The decennial U.S. Census of Population and Housing includes both published summary
data and public use microdata on computer tape. The summary data are the most widely used
version of census information, but their usefulness in analysis is limited by the fact that they
include discrete characteristics of a particular geographic area. It is not possible to derive subsets
of the data beyond those that are already published. For example, the published data provide the
information about the numbers of households who fall within various income ranges, and the
distribution of workers among sectors of the economy and occupational categories, but It is not
possible to derive the number of low-income workers in a specific sector or occupation from the
published data.
PDMS data, on the other hand, allow for cross -tabulations of one census variable by any
other census variable, because the basic unit of data is a household and its occupants. The PUMS
data are drawn from a five -percent sample of households who completed the long -form (i.e.,
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Employment and Employee Housing Impacts
detailed) census questionnaire. This includes a detailed categorization of the industry sector in
which each employed member of the household works. Data are reported for geographic areas of
about 100,000 population each.37 For this analysis, HR&A used a summary set of PDMS data for
Los Angeles County to match the geographic extent of the RV PLAN employment estimates. The
principal limitation of the PDMS data is that, like all census data, It becomes available only at ten-
year intervals.
2. Estimating the Number of Low -Income Worker Households
The total employment demand generated by consumption spending in new market rate
multi -family developments in Santa Monica, as presented above, includes workers at all income
levels. Because this analysis seeks to determine the connection between such developments and
the need for housing affordable to low-income households, it is necessary to determine what
portion of all such workers fall within this income category. This requires a two-part analysis
using the PDMS data.
First, the percentage of low-income households was estimated using the 1990 PUMS data
for Los Angeles County. The IMPLAN employment estimates were sorted to identify the 58
sectors (out of a total of 528 IMPLAN sectors) that account for almost 92% of all household
consumption impacts. A crosswalk between the industry categories used by the IMPLAN model
and the industry categories used by PDMS was developed to identify workers in the PDMS data
(and their households) who were employed in the 58 most affected sectors." A variable that
identifies workers employed in any of the 58 sectors was created in the PDMS data so that the
affected workers and households could be further analyzed.
Because the household incomes reported in PDMS were current as of 1989, the year
preceding the Census enumeration, a household income adjustment was required to bring the
income data into conformance with current Santa Monica "low-income" thresholds, which vary
by number of persons per household.34 An evaluation of median family income estimates used for
37 Because Santa Monica's 1990 population fell short of this threshold, its PUMS data is combined with that
for several other coastal and Santa Monica Mountains communities rendering It less useful for analysis than larger
population centers.
38 The PUMS data used an industry classification numbering system that corresponds with the industry
numbering system in the M'LAN model, both of which are based on the U.S. government's Standard Industrial
Classification (SIC) system. The correspondence between the U.S. Census (i.e., PUMS) classification system and the
IMPLAN model's system is shown in the first two columns of the IMPLAN employment estimates in Appendix A.
39 The City's thresholds for FY 1997-98 were up to $21,546 for a one-person household; up to $24,624 for a
two -person household; up to $27,702 for a three-person household; and up to $30,780 for a four -person household.
Near Multi-Fandly Development -Affordable Rousing Nexus Page 35
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Employment and Employee Housing Impacts
means testing in many federal programs indicated that the 1989 income figures from PDMS
should be increased by 26 percent in order to approximate 1996 income levels."
The adjusted household income values for workers in the 58 industry sectors affected by
consumption spending in typical new market rate multi -family developments in Santa Monica
were then arrayed against Santa Monica's low-income housing qualification thresholds.
Tabulating the results of the comparison between adjusted household income and the qualifying
thresholds shows that approximately 17 percent (16.74%) of all workers in the 58 affected
industry sectors are members of low-income households. This percentage was applied to the total
employment estimates presented in Chapter IV to calculate the number of low-income workers in
those industries that are affected by consumption spending from households in new market rate
multi -family developments in Santa Monica. The consumption -related spending by households in
the four prototypical five -unit apartment and condominium developments generates demand,
therefore, for between two-thirds (4.63) and one (0.93) low-income worker, as shown in Table
IV -3,
40 Income Statistics Branch/I-H-IES Division, U.S, Bureau of the Census, U.S. Department of Commerce,
Median Income for 4 -Person Families, By State, February 26, 1998.
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Employment and Em to ee Housing Impacts
Table IV -3
DERIVATION OF LOW-INCOME WORKER DEMAND RESULTING FROM
TOTAL HOUSEHOLD CONSUMPTION EXPENDITURES IN
FOUR PROTOTYPICAL 5 -UNIT MARKET RATE MULTI -FAMILY DEVELOPMENTS
IN THE CITY OF SANTA MONICA
Prototype Per -Prototype Per -Prototype Total
Average Annual Average Annual Workers
Low -Income
Workers "
Household Consumption
Income' Expenditures 2
Apt. -- Lower Cost Area $335,189 $253,068 3.74
0.63
Apt. - Higher Cost Area $425,919 $321,569 4.76
0.80
Condo -- Lower -Cost Area $387,681 $292,699 4.33
0.73
Condo - Higher -Cost Area $496,260 $374,676 5.54
0.93
AVERAGE $411,263 $310,503 4.59
0.77
From Chapter III, Table 111-4.
s From Chapter III, Table 111-6.
' From Chapter IV, Table IV -2.
a Total Workers x 16.74%.
Source: HFMA
Not all low-income workers are necessarily members of low-income households. The
next step in the analysis, therefore, was to estimate the number of low-income households
associated with these low-income workers, because many households are supported by more than
one worker. Tabulations of the PDMS data show that households with low-income workers in
one of the 58 most affected sectors contain, on average, about 2.4 workers (2.363). The number
of new low income households is estimated by dividing the number of low income workers by this
factor. As shown in Table IV -4, consumption spending by households in the four prototypical
new market rate multi -family projects in Santa Monica creates demand for between one-quarter
(0.27) and one-third (0.39) low-income worker household.
New Multi -Family Development Affordable Housing Nexus Page 37
Hamilton, Rabinovitz & Alschuler; Inc. July 7, 1998
Em to meat and Em to ee Housln Im acts
Each of these households, by definition, requires a corresponding fraction of a unit of
housing at a price within their means, as defined by federal, State and City housing programs.
The cost to the City of providing these units, and what this implies about a fee that may be
charged developers of new market rate multifamily developments to offset this cost, are
discussed in the next Chapter.
NeipMulfi gamily Development -Affordable Housing Nexus Page 38
Hamilton, Rabinovitz &A Ischuler, Inc. July 7, 1998
Table IV -4
DERIVATION OF LOW-INCOME WORKER HOUSEHOLD DEMAND RESULTING
FROM
TOTAL HOUSEHOLD CONSUMPTION EXPENDITURES IN
FOUR PROTOTYPICAL 5 -UNIT MARKET RATE MULTI -FAMILY DEVELOPMENTS
Prototype
Per -Prototype Total Low -Income
Low -Income
Average Annual Workers 2 Workers
Worker
Household
Households
Income
Apt. - Lower Cost Area
$335,189 3.74 0.63
0.27
Apt. -- Higher Cost Area
$425,919 4.76 0.80
0.34
Condo -- Lower -Cost Area
$387,681 4.33 0.73
0.31
Condo -- Higher -Cost Area
$496,260 5.54 0.93
0.39
AVERAGE
$411,263 4.59 0.77
0.33
' From Chapter III, Table I11-6.
2 From Chapter Ill, Table IV -2.
3 From Table IV -3.
4 Low-income Workers divided by
2.36 low-income workers per household.
Sourcen HR&A
Each of these households, by definition, requires a corresponding fraction of a unit of
housing at a price within their means, as defined by federal, State and City housing programs.
The cost to the City of providing these units, and what this implies about a fee that may be
charged developers of new market rate multifamily developments to offset this cost, are
discussed in the next Chapter.
NeipMulfi gamily Development -Affordable Housing Nexus Page 38
Hamilton, Rabinovitz &A Ischuler, Inc. July 7, 1998
V. ESTIMATING JUSTIFIABLE DEVELOPMENT FEES
Chapter IV presented estimates of the marginal demand for affordable housing caused by
the consumption spending from typical new market rate multi -family developments. The cost of
producing this much affordable housing, taking into account any other fund sources that are
reasonably foreseeable, is a basis for arriving at a reasonable development fee, as presented in this
Chapter.
A. THE CITY'S SUBSIDY GAP TO DEVELOP RENTAL UNITS AFFORDABLE TO
LOW-INCOME HOUSEHOLDS
The City of Santa Monica has generally relied on non-profit, community-based
development organizations to develop units in the City that are affordable to lower income
households. The process is complicated by the need to merge a variety of public and private
funding sources and a bewildering mix of regulations and procedures that accompany each source
of funding, which are sometimes in conflict with one another. Further, these projects must be
carried out in the same real estate market environment as for-profit projects.
1. Development and Operating Costs
The cost of developing affordable units through non-profit developers is, in general,
somewhat less expensive than the cost of producing for-profit housing, but not much less. The
reasons the savings may appear less than the "non-profit" status of the organization may initially
suggest include:
Multi -layered Financing. The layered subsidy, debt and equity structure used in the non-
profit housing production process -- with four to six funding sources per project not
uncommon -- allows rents to be maintained at levels deemed "affordable" to lower-income
households. However, packaging these resources is technically complex, time consuming,
costly, and can result in inefficient choices about project size, unit mix and design.
Transaction costs, particularly the cost of arranging for equity contributions through the
Federal Low Income Housing Tax Credit program, are expensive.
■ Accommodating Numerous Public Objectives. Non-profit development projects, because
of their public nature, typically involve more time consuming planning and approval
processes (e.g., neighborhood design workshops), are sometimes held to a higher (and
more costly) standard of design, incur unique development costs (e.g., payment of
prevailing construction wages) and often provide a higher level of building management
New Multi -Family Development Affordable Housing Nexus Page 39
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Justifiable Develo me_tFees
and tenant services than is typical of private projects.
Yet, non-profit projects compete for land and buildings in the same real estate market, and
have to pay about the same costs for numerous professional services (e.g., architects and
engineers), as the private sector.
2. Affordable Housing Funding Resources
Contrary to the situation in the late 1980s and early 1990s, there are today only very
limited sources of funding for either new construction of affordable housing, or the acquisition
and rehabilitation of existing buildings to maintain them as affordable housing. Funds to develop
affordable housing in Santa Monica generally come from three sources.
Loans Supported By Affordable Tenant Rents. Affordable housing projects typically
produce enough net operating income to support a modest mortgage, which is usually
obtained from a bank or an intermediary institution at below-market rates (e.g., about one
percentage point below conventional permanent loans for apartment buildings, or about
7.00% today). The maximum loan amount is a function of the average affordability level
of the tenant households, which dictates the maximum rent they are considered able to pay
under Federal, State and City guidelines,41 and the typical costs of operating the building
(e.g., administration, maintenance, property taxes, an allowance for rent collection losses),
plus a reserve for operating losses and building systems replacement. The income side of
the ledger is therefore constrained by tenant affordability limits, and the cost side of the
ledger is generally higher than in private development, because non-profit developers tend
to provide a higher level of service to tenants, and are required by public lenders to
maintain higher reserves, than is typical in for-profit projects. Thus, the amount of net
operating income (gross income minus operating expenses and the losses allowance)
available from an affordable housing development can only support a relatively small loan,
even at below-market interest rates.
The Federal Low -Income Housing Tax Credit. About the only remaining non -City public
funding resource for affordable housing is equity raised through selling tax credits to
41 Federal, State and City laws and policies define three household income categories that merit special
housing assistance: very low-income households (earning under 50% of the Los Angeles County Median Family Income
(IIID), low-income households (51%-80% x MFT, depending on the program) and moderate -income households (81 %-
120% x MFI, depending on the program). These income thresholds, coupled with a Federal standard that a household
should not pay more than 30 percent of its income for housing costs, the Los Angeles County MFR, which is adjusted by
the Federal government each year and a City calculation that converts household size to unit size, is the basis for
establishing maximum affordable rents and for -sale housing purchase prices eaeh year.
New Multi -Family Development Affordable Housing Nexits Page 40
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Justifiable Develo mentFees
private investors under the Federal Low -Income Housing Tax Credit program. Because
of the way these credits are made available in California, and the fierce competition for
them from both non-profit and for-profit developers, the maximum credit, equal to about
nine percent of eligible development costs, is no longer available to projects in Los
Angeles County. Four percent tax credits are still readily available when used in
combination with the issuance by the City of tax-exempt bonds. This is the approach that
will most likely be used in the future to build new affordable housing in Santa Monica.
Though the tax credit is available to projects in which all of the units are rented at prices
affordable to households at 60 percent of the County median family income, the City's
affordable housing projects usually attempt to also assist households of even more limited
means. Thus, as a practical matter, neither tax credits nor any other non -City financial
assistance would be available to projects in which all of the units were affordable at
Proposition R's and Ordinance 1615's definitions of "low-" and "moderate" -income (i.e.,
60% and 100% x MEI, respectively).
City Resources. The City has several current, and projected future, sources of funds that
it channels into the development of affordable housing. Briefly, these include:42
-- Federal Affordable Housing Funds Allocated to Santa Monica. The City receives
annual allocations of funds under two Federal programs for affordable housing, on
a formula basis. These are the HOME Investment Partnership and the Community
Development Block Grant. Only a portion of the funds received by the City are
used for new construction of affordable housing. The annual amounts of the City
allocations depend on national budget decisions made each year by the U.S.
Congress, and the local share of those funds available for affordable housing
development depend on annual City budget decisions.
-- Repayment ofMERL Program Loans. The City will eventually receive repayment
of $33.4 million in loans from CDBG and HOME funds made available by the
Federal government to assist with reconstruction of damaged multi -family
buildings after the 1994 Northridge earthquake. Loan repayment proceeds will be
restricted to uses eligible under the CDBG and HOME programs (i.e., to benefit
lower-income households), including affordable housing development.
-- Redevelopment Housing Funds. At least 20 percent of the tax increment revenues
derived from the City's four redevelopment project areas must be reserved for the
42 More detailed explanations of these programs, their projected five-year yields, and the number of new
affordable units they are estimated to help support, are included in Appendix D to the Housing Element Update.
New Multi Family Development-AffordableHousing Nexus Page 41
Hamilton, Rabinovitz & Alschuler, Inc. July 7, 1998
Justifiable Development Fees
production of affordable housing.
-- Other Existing Development Fee Programs, The City also receives funding for
affordable housing through an existing fee on the development of commercial
office buildings, and the remaining balance of tax revenues from the sale of
condominiums converted from apartments under the Tenant Ownership Rights
Charter Amendment (TORCA), which has now expired.
-- Other Miscellaneous City Programs. Funding is also available for affordable
housing development from repayment of an inter -fund loan to assist with the
purchase of property at the corner of Pico and Cloverfield Boulevards to expand
Virginia Park, funds committed through negotiated Development Agreements and
from the existing Ordinance 1615 in lieu fee program (less than $100,000
projected over the next five years). The City Council also allocates funds from the
General Fund to assist development of affordable housing.
-- New Tax -Exempt Bond Program. The draft 1998-2003 Housing Element Update
proposes a new funding program through which the City would issue tax-exempt
bonds to provide below-market rate loans for affordable housing development.
3. City Financial Contributions to Affordable Housing Projects
The scale of the City's contribution to the cost of affordable housing projects, through one
or more of the above sources, is derived by subtracting the value of a rent -supportable mortgage
and any Federal, State or other non -City debt, equity or subsidies from total development cost.
The current per-unit subsidy gap for newly constructed rental units affordable to low- and
moderate -income households is as shown in Table V-1 (all calculation details are provided in
Appendix B):
New Multi -Family Development -Affordable Housing Nexus Page 42
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Justifiable Develo mentFees
Table V-1
PER-UNIT NEW DEVELOPMENT SUBSIDY GAP FOR VERY LOW- AND LOW- INCOME HOUSEHOLDS,
CITY OF SANTA MONICA, 1998
(includes blend of 2- and 3 -BR units and a blend of high and low land prices)
Calculation Component Very Low -Income Low -Income
(5011/6 x MFI) (60% x MFI)
Development Cost (Range)'
$182,920 - $274,901 $182,920 - $274,901
Predictable Debt/Equity
Contributions (Range)
4% Tax Credits2 $37,512 - $48,528 NA
Bank Loan3 $28.396 - $38.977 $49.638 - $61.426
Total $65,908 - 87,505 $49,638 - $61,426
Development Subsidy Gap (Range)
$116,984 - $187,433 $133,044 - $213,844
Development Subsidy Gap
(weighted average)' $134,822 $154,916
' Includes land, construction, professional fees and construction financing costs.
2 Through sale of tax credits assigned via competitive application for Federal Low -Income Housing Tax Credit
Program
a Below-market rate loan through tax-exempt financing for the 50°x6 x MFI units; conventional loan for others.
a Refer to calculation details in Appendix B.
Snlil'1i4::U$&A
The 60 percent of median scenario in Table V-1 does not include the four percent tax
credit, because the City is unlikely to pursue tax credits for a tax-exempt project in which all of
the units rent at exactly the 60 percent -of -median level. If it did, the weighted average City
subsidy gap would decline to $112,988 (i.e., by the amount of the additional tax credit).
Accounting for tenant -supportable debt and assumptions about the most likely mix of units sizes
and City submarket areas where new affordable housing would be constructed, it is estimated that
the average City financial contribution, or subsidy, to produce an affordable unit is about
$155,000. Using this value is particularly appropriate because evidence is beginning to show that,
with the improving real estate market and other pressures, such as partial decontrol of rents with
full implementation of the Costa -Hawkins Rental Housing Act, land costs are beginning to rise
above the assumptions used in the above modeling work.
New Multi Family Development Affordable Housing Nexus Page 43
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Justifiable DevelopmentFees
B. JUSTIFIABLE DEVELOPMENT FEES
Multiplying this average per-unit subsidy amount by the number of affordable housing
units needed to meet the consumption demands of new market rate multi -family developments
yields the fee amount that could reasonably be charged to the developer to offset the City's costs.
This fee amount can also be expressed as a function of the gross floor area of a typical new
market rate multi -family development, as shown in Table V-2. A more detailed summary of the
chain of calculations in the nexus analysis is included as Appendix C.
Table V-2
DERIVATION OF A DEVELOPMENT FEE TO OFFSET THE AFFORDABLE HOUSING DEMAND
CAUSED BY TOTAL HOUSEHOLD CONSUMPTION EXPENDITURES
IN FOUR PROTOTYPICAL 5 -UNIT MARKET RATE MULTI -FAMILY DEVELOPMENTS
Prototype Per -Prototype Units of Total Fee Amount
Average Annual Low-income Fee Per Gross
Consumption Housing AmountSquare Foot 4
Expenditures' Demand'
Apt. - Lower Cost Area
$253,068
0.27
$41,090
$5.41
Apt. - Higher Cost Area
$321,569
0.34
$52,215
$6.87
Condo -- Lower -Cost Area
$292,699
0.31
$47,525
$6.26
Condo - Higher -Cost Area $374,676 0.39 $60,835 $8.01
' From Chapter III, Table III -6.
From Chapter IV, Table IV -4.
3 Low -Income Housing Demand x $154,916 (the City's average subsidy cost).
3 Total Fee Amount divided by 7,595 gross square feet per typical market rate multi -family development.
Considering that the analysis is based on reasonable estimates of the affordable housing
demand generated by prototypical new market rate apartments and condominiums, assumes that
all households residing in each prototypical project's dwelling units exhibit average income and
spending circumstances, and that there are pockets of lower-cost areas and higher -cost areas in
each City submarket area, it would be appropriate for the Affordable Housing Production
Program fee to be based on an average of the justifiable fees for each product type. The average
of the justifiable fee for the two apartment prototypes is $6.14 per gross square foot for new
market rate apartment developments, and $7.13 per gross square foot for new market rate
condominium developments.
New Multi -Fancily Development -Affordable 11ousing Nexus Page 44
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Justifiable Development Fees
Because the calculation of the fee is a direct function of the per -prototype average annual
consumption expenditures which, in turn, is a function of the household income calculation and
the housing cost -to -income ratio on which that calculation rests, a different fee level would result
from alternative ratio assumptions. For example, if the apartment rent -to -income ratio is assumed
to be equal to the 35 percent factor used for condominiums, the apartment fees would increase by
$0.31-$0.39, or to an average of $6.49 per gross square foot (+$0.33). If on the other hand, the
housing cost -to -income ratio for both the apartment and condominium were modified to meet the
housing policy goal of 30 percent, the average apartment fee would increase to $7.58 (+$1.43)
and the average condominium fee would increase to $8.32 (+$1.19). For the reasons presented in
Chapter III, however, HR&A believes the ratios that underlie the results in Table V-2 are the
most analytically defensible assumptions.
These fee amounts in Table V-2 are generally consistent with the fee amounts that
previous analysis indicates can be assessed such projects without the fee becoming a
"governmental constraint" on new development, within the meaning of State housing element law.
This analysis showed that fees on typical new market rate apartment projects could fall within a
range of $546 per square foot. Fees on typical new market rate condominium projects could fall
within a range of $448 per square foot using a return on equity feasibility threshold, or between
$5 and $7 using a gross margin return threshold." Though a fee of $6.14 per gross square foot
for apartments and $7.13 per gross square foot for condominiums, per Table V-2, could lower
slightly the financial returns for some projects, the resulting returns would still be acceptable to
enough developers to enable the City to achieve its "regional fair share" housing production
target. We conclude, therefore, that Affordable Housing Production Program fees set at the
average of the per -product type amounts shown in Table V-2 would not constitute a constraint on
new development within the meaning of State law.
43 "HR&A, "Recommendations for Revising the City of Santa Monica's Inclusionary Housing Program,"
memorandum to Santa Monica Housing Manager Robert Moncrief, dated April 6, 1998, pp. 24-28. See also
supplemental information, including modeling using a different feasibility threshold for condominiums, dated April 21,
1998.
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Appendices
APPENDIX A
Total Employment Impacts Generated By Household Consumption Expenditures
for Four Prototypical Market Rate Multi -Family Developments
in the City of Santa Monica
NetivMulti-FainilyDevelopttient-Affoi•dableHousing Nexus July7, 199$
Hamilton, Rab inovitz &Alschuler, Inc.
MULTI -FAMILY PROTOTYPE #1 --APARTMENTS (Lower -Cost Area)
1990 Census
IMPLAN
Cumulative
Ste
Sector
industry
Direct`
Indirect`
Induced`
Total`
Percent
Percent
041
454
Eating & Drinking
304.40
13.26
108.63
426.29
11.4%
11.4%
602
455
Miscellaneous Retail
179,31
2,89
86,20
248,39
6,691,
18.0%
820
490
Doctors and Dentists
157.90
0.00
54,98
212.89
5.791,
23.791,
5XX
447
Wholesale Trade
93.26
35.00
46.50
174.76
4.7%
28.4%
031
492
Hospble
110.16
0.01
47,55
167.72
4.2%
32.691,
600
449
General Merchandise Stores
98.26
1.40
33.50
133.16
3.6%
36.191,
831
450
Food Stores
88.01
2.07
35.67
125.75
3.4%
39.5%
612 821
451
Automotive Dealers & Service Stations
78.63
2.12
29.73
110.39
2.9%
42.4%
910
488
Amusement and Recreation Services, N.E.C.
65.74
0.47
21.37
87.59
2.3%
44,8%
B50
496
Colleges, Universities, School@
57.13
4.26
18.39
79.78
2.1%
46.991,
761
525
Domestic Services
55.86
0.00
19.49
76.37
2.0%
48.9%
823
452
Apparel & Accessory Stores
BOAS
0.38
17.76
68,62
1.8%
60.8%
712
462
Real Estate
16.74
30.73
21.03
68.50
1.8%
52.6%
731
474
Personnel Supply Services
3.82
46.14
18.01
67.97
1.8%
54.4%
700 701
456 _
Banking
36.22
8.32
17.22
61.76
1.6%
56.1%
631
453
Furniture & Home Furnishings Stores
44.62
0.49
15.04
60.15
1.6%
67.7%
711
459
Insurance Carriers
41.58
2.77
13.89
58.24
1.6%
59.2%
842
495
Etementary and Secondary Schools
42.90
0.00
11.14
54.04
1.4%
60.7%
871
500
6oclal Services, N.E.C.
40,62
0,40
12.67
63,69
1.4%
82,1%
772 780
466
Beauty and Barber Shops
32.59
6.32
14.31
53.22
1.4%
63.5%
702
463
Hotels and Lodging Places
29.33
10.54
12.70
62.56
1.4%
64.9%
702
457
Credit Agencies
19.iS
16.94
13.26
51.36
1.4%
66.3%
840
493
Other Medical and Health Services
31.47
5.39
13.54
50.39
1.3%
67.6%
751
479
Automobile Repair and Services
31.67
3.34
11.67
46.59
1.2%
869%
771
464
Laundry, Cleaning and Shoe Repair
22,86
9.45
11.03
43.13
1.2%
70.0%
832
491
Nursing and Protective Care
21.33
0.00
21.49
42.82
1.1%
71.2%
841
494
Legal Services
17.87
12.02
12.22
42.11
1.1%
72.3%
873
INA
Labor and Chic Organizations
31.66
0.06
10.30
42.02
1.1%
73.4%
580 591 582
448
Building Materials & Gardening
31,20
0.14
9.93
41.26
11.1%
74.5%
410 411
435
Motor Freight Transport and Warehousing
14.75
13.96
10.13
38.84
1.0%
75.6%
870
501
Rosldonllal Cara
29.12 -
0.00
9.00
38.12
1.0%
76.6%
60
66
Maintenance and Repair Other Facilities
0.00
27,11
9,72
36.53
1.091,
77.6%
741
470
Other Business Services
2.37
22.85
8.93
34.15
0.9%
78.5%
711
460
Insurance Agents and Brokers
0.00
24.20
7.58
31.78
0.6%
79.3%
Boo
607
Accounting, Audit€ng and Bookkeeping
0.84
21.16
7.81
29.50
0.8%
80.1%
862
499
Child Day Care Servlees
20.52
0.00
6.28
27.04
0.7%
80.9%
722
472
Services To Buildings
5.37
13.86
7.19
26.41
0.7%
81.6%
860
497
Other Educations€ Services
18.53
0.77
6.13
25.42
0,7%
52.2%
732
475
Computer and Data Processing Services
0.99
17.03
6.41
24.44
0.7%
82.9%
412
613
U.S. Postal Service
5.25
12.58
6.19
24.02
0.6%
113.5%
872
602
Other Nonprofit Organizations
17.37
0.39
5.54
73.30
0.6%
84.2%
892
508
Management and Consulting Services
0.02
16.94
6.22
23.18
0.6%
84.8%
441 442
441
Communications, Except Radio and TV
11.18
5.35
6.46
22.99
0.6%
55.4%
810
489
Membership Sports and Recreation Clubs
15.24
0.68
5.62
22.34
0.6%
86.0%
60
55
Maintenance and Repair, Residential
O.Oo
15.93
5.33
21.26
0.6%
86.6%
791
468
Miscellaneous Personal Services
15.41
0.14
5.12
20.67
0.6%
87.1%
740
476
Detective and Protective Services
6.58
8.69
5.Ot
19.28
0.5%
87.6%
710
458
Security and Commodity Brokers
6.93
6.44
5.21
18.58
0.5%
88.191,
151
124
Apparel Made From Purchased Materials
12.99
OAS
4,58
18.04
0.5%
88.6%
901
512
Other State and Local Govt Enterprises
10.46
1.97
4.68
17.09
0.5%
89.1%
Bao
605
RalNlous Organizations
11.79
0.00
3.64
15.43
0.4%
89.6%
522.
State & Local Government- Education
0.00
0.00
- 0.00
- 0.00
0.0%
100.0%
623
State & Local Government- Non -Education
0.00
0.00
0.00
0.00
0.0%
100.0%
524
Rest Of The World Industry
0.00
0.00
0.00
0.00
0.0%
100.0%
526
Dummy
0.00
0.00
0.00
0.00
0.0%
100.0%
527
Dummy
0,00
0.00
0100
0.00
0.0%
100.0%
528
Inventory Valuation Adjustment
0.00
0.00
0100
0.00
0.0%
100.0%
*Number of Jo" ganorated by $335,189,000 In PCE
2,225,24
633.54
985.30
3,744.09
Rescaled to Prototype 1= $335,189
in PCE
2,22624
0,53354
0,88530
3.74409
9a&IaHazY&WLAMp:athyhA. PA96 t HR&A, hc. 71TAS
MULTI -FAMILY PROTOTYPE #2 -APARTMENTS (Highor-Coat Area)
1880 Census
IMPLAN
Cumulative
Sic
Sector
Industry
Direct,
Indirect*
Induced'
Total
Percent
Percent
941
454
Eating & Drinking
386.82
16.86
€38.04
541.72
11.4%
11,4%
B82
455
Miscellaneous Retail
227.86
3.67
64.12
315.64
6,6%
16.0%
820
490
Doctors and Dentists
200.66
0.00
89,87
270.53
5.7%
23.7%
5�
447
Wholesale Trade
118,51
44.47
59.09
222.08
4.7%
26.4%
831
492
Hospitals
139.99
0.01
60.42
200,43
4.2%
32.6%
600
449
General Merchandise Stores
124.86
1.78
42.57
169.21
3.6%
36.1%
811
450
Food Stores
111.84
2.63
45.33
159.80
3.4%
39.6%
012 021
451
Automotive Dealers & Service Stations
99.811
2.69
37,78
140.28
2.9%
42.4%
8110
488
Amusement and Recreation Servk:es, N.E.C.
83.54
0.60
27.16
111.30
2.3%
44.8%
850
496
Colleges, Unhreraities, Schools
72.60
5.41
23.37
191.38
2,1%
46.9%
791
525
Domestic Services
71.01
0.00
24,77
95.78
2.0%
48.9%
623
452
Apparel & Accessory Stores
64.15
0.48
22.57
87.21
1.8%
50.8%
712
462
Real Estate
21.27
39.05
26.73
87.04
1.8%
62.6%
731
474
Personnel Supply Services
4.86
68.63
22.88
86.37
1.8%
54.4%
700 701
456
Banking
46.02
10.58
21.88
78.48
1.6%
56.1%
931
453
Furniture & Home Furnishings Stores
50.71
0.62
19.11
76.44
1.6%
57.7%
711
459
Insurance Carriers
62.84
3.52
17.65
74.00
1.6%
69.2%
842
495
Elementary and Secondary SchDols
54.62
0.00
14.16
68.67
€.4%
60.7%
a71
500
Social Services, N.E.C,
51.62
0,51
16.10
68.23
1.4%
62,1%
772 780
466
Beauty and Barbar Shops
41.41
8.03
18.19
67.63
1.4%
63.5%
762
463
Hotels and Lodging Places
37.28
13.40
16,14
66.81
1.4%
64.9%
702
457
Credit Agencies
24.35
24,07
16.85
65.27
1.4%
66.3%
840
493
Other Medical and Health Services
39.99
6.84
17.20
64.04
1.3%
67.6%
751
479
Automoblle Repair and Services
40.25
4.25
14.71
59.20
1.2%
68.9%
771
464
Laundry, Cleaning and Shoe Repair
28.80
12.01
14.01
54.81
1.2%
70,0%
832
491
Nursing and Protective Care
27.11
0.00
27.31
54.41
1,1%
71.2%
841
494
Legal Services
22.70
15.28
15.53
53,52
1.1%
72.3%
873
604
Laborand Civic Organizations
40.23
0.07
13,09
53.39
1.1%
73.4%
580 581 582
448
Building Materials & Gardening
39.65
0.17
12.61
52.44
1.1%
74,5%
410 411
435
Motor Freight Transport and Warehousing
18.75
17.73
12.87
49.35
1.0%
75.6%
870
501
Residential Care
37.01
0.00
11.43
48,44
1.0%
76.6%
60
56
Maintenance and Repair Other Facilities
0.00
34.45
12.35
46.80
1.0%
77.6%
741
470
Other Business Services
3.01
29.03
11.34
43.39
0.9%
78,6%
711
460
Insurance Agents and Brokers
0.00
30.75
9.63
40.38
0,8%
79.3%
890
607
Accounting, Auditing and Bookkeeping
1.07
26.88
9.92
37.67
0.8%
80.1%
882
499
Child Day Care Services
26.45
0.00
7.98
34.43
0.7%
80,9%
722
472
Services To Bulldings
6.82
17.61
9.13
33,56
0.7%
81.6%
860
497
Other Educational Services
23.65
0,96
7.78
32.31
0.7%
82.2%
732
475
Computer and Data Processing Services
1.26
21.64
8.15
31.05
0,7%
82.9%
412
613
U.S. Postal Service
6.68
15.96
7,87
30.62
0.6%
63.6%
872
602
Other Nonprofit Organlzatlons
22,07
0.50
7.04
29.61
0.6%
84.2%
892
508
Management and Consulting Services
0.02
21.53
7.91
29,46
0.6%
84.8%
441 442
441
Communications, Except Radio and TV
14.21
6,80
6.21
29.22
0.6%
85.4%
810
489
Membership Sports and Recreation Cubs
20.64
0.73
7.02
28.39
0.6%
86.0%
60
55
Maintenance and Repair, Residential
0.00
20.24
6,77
27.02
0.6%
86.6%
791
468
Miscellaneous Personal SerAcas
€9,59
0.17
6.50
26.26
0,6%
87.1%
740
476
Detective and Protective Services
7.09
11.04
6.37
24.50
0.5%
87.6%
710
458
Security and Commodity Brokers
8.81
8.18
6.62
23.61
0.5%
88.1%
151
124
Apparel Made From Purchased Materials
16,51
0.61
5.81
22.93
0,5%
88.6%
801
512
Other State and Local Govt Enterprises
13.30
2.50
6.92
21,72
0.5%
89.1%
880
605
Religious Organizations
14.98
0.00
4,63
19.60
0.4%
89.5%
522
State & Local Government- Education
0.00
0,00
0.00
0.00
0.0%
100,0%
523
State & Local Government - Non -Education
090
0.00
0.00
0.00
0.0%
100,0%
524
Rest Of The World Industry
0.00
0,00
0.00
0.00
0.0%
100,0%
526
Dummy
0.00
0,00
0.00
0.00
0.0%
100,0%
527
Dummy
0.00
0.00
0.00
0.00
0.0%
100.0%
528
Inventory Valuation Adjustment
0,00
0,00
0.00
0.00
0.0%
100.0%
'Number of Jobs by $425,919,000 In PCE
2,827,75
678.00
1,252.08
4,757.84
Rescaled to Protoypa 2 = $425,919 In PCE
2.82775
0,67800
1.25208
4.75784
a.IJoNwXWPLAWj*2Nghb. Peg.2 FWL4, W. 7rrf99
MULTI -FAMILY PROTOTYPE #3 -CONDOS (Lower -Coat Area)
1880 Census
IMPLAN
Cumulative
sic
Sector
Industry
Direct'
Indirect'
Induced'
Total`
Percent
Percent
641
454
Eating & Drinking
352.07
15.34
125.64
493.05
11.4%
11.39%
682
456
Miscellaneous Retail
207.39
3.34
76.56
287,29
6.6%
1810291,
820
400
Doctors and Dentists
182,83
0.00
63.59
246.22
5.7%
23.71%
5xx
447
Wholesale Trade
107.67
40.46
53.78
202.13
4.7%
28.37%
831
492
Hospitals
127.42
0.01
55.00
182A2
4.296
32.5991,
600
449
General Merchandise Stores
113.66
1.62
38.74
154.01
3.6%
36.14%
611
450
Food Stores
101.79
2.40
41.25
145.45
3.4%
39.50%
612 021
451
Automotive Dealers & Service Stations
90.63
2.45
34.39
127.67
2,9%
42,4596
610
488
Amusement and Recreation Services, N.E.C.
76.03
0,55
24.72
101.30
2.3%
44.79%
850
496
Colleges, Universities, Schools
66.08
4.92
21.27
92.28
2.1%
46.92%
761
525
Domestic: Services
64.63
0.00
22.54
87.17
2.0%
46,9396
623
452
Apparel 8 Accessory Stares
58.39
0.44
20.54
79.37
1.8%
50.77%
712
462
Real Estate
19.36
36.54
24.33
79.22
1.8%
52.60%
731
474
Personnel Supp€y Services
4.42
53.37
20.83
78.61
1.8%
54.4196
700 701
456
Banking
41.69
9.63
19.91
71.43
1.6%
56.116%
631
453
Furniture & Home Furnishings Stares -
51.61
0.57
17.39
69.57
1.6%
57.67%
711
459
Insurance Carriers
48.09
3.20
16.06
67.36
1.8%
59,2296
842
496
Elementary and Secondary Schools
49.62
0.00
12.88
62,60
1.4%
60.67%
871
500
Social Services, N.E.C.
46.98
0.46
14.65
62.10
1.4%
62.10%
772 780
466
Beauty and Barber Shops
37.69
7.31
16.56
61.56
1.4%
63.52%
762
463
Hotels and Lodging Places -
33.93
12.19
14,69
60,81
1.4%
64.9396
702
457
Credit Agencies
22.16
21.91
15.34
59.40
1.4%
66.30%
840
493
Other Medical and Health Services
36.40
6.23
15.66
58.29
1.3%
67.64%
751
479
Automobile Repair and Services
36.63
3.87
13.39
53.89
1.296
66,6996
771
464
Laundry, Cleaning and Shoe Repair
26.21
10.93
12.75
49.80
1.2%
70.04%
932
491
Nursing and Protective Care
24.67
0.00
24.65
49.63
1.1%
71.18%
841
494
Legal Services
20.66
13.91
14.14
48.71
1.1%
72,3196
873
504
Labor and CIVIC Organizations
36.62
0,07
11.91
48,60
1.1%
73.43%
580 581 582
448
Building Materials & Gardening
36.09
0.16
11.48
47.73
1.1%
74.53%
410 411
435
Motor Freight Transport and Warehousing
17.06
16.14
11.72
44.92
1.0%
75.579h
870
501
Residential Care
33.69
0.00
10.40
44.09
1,0%
76.59%
00
56
Maintenance and Repair Other Facilities
0,00
31.36
11.24
42.60
1.0%
77.57%
741
470
Other Business Services
2.74
26.42
10.33
39.49
0.9%
78.48%
711
460
Insurance Agents and Brokers
0.00
27.99
8.76
36.75
0.8%
79,3396
890
607
Accounting, Auditing and Bookkeeping
0.97
24.47
9,03
34,47
0.896
80.13%
882
499
Child Day Care Services
24,08
0.00
7.26
31.34
0.7%
80.85%
722
472
Services To Buildings
6.21
16.03
8.31
30.55
0.7%
81.56%
860
497
Other Educational Services
21.43
0,89
7,08
29.41
0.7%
82.24%
732
475
Computer and Date Processing Services
1.14
19.70
7.42
28.26
0.7%
82.89%
412
513
U,S, Postal Service
6.08
14,54
7,16
27.78
0.6%
83.53%
972
602
Other Nonprofit Organizations
20.09
0.45
6.40
26.95
0.6%
84.15%
892
608
Management and Consulting Services
0.02
19.59
7.20
26.81
0.6%
84.7796
441 442
441
Communications, Except Radio and TV
12,93
6.19
7.47
26.69
0.6%
85.39%
810
489
Membership Sports and Recreation Clubs
18.79
0.67
6.39
25.64
0.6%
85A11%
60
55
Maintenance and Repair, Residential
0.00
18.42
6,16
24.59
0.6%
66.55%
791
468
Miscellaneous Personal Services
17.63
0.16
5.92
23.90
0.6%
87.10%
740
476
Detective and Protective Services
6.45
10.05
5.79
22.30
0,5%
87,6296
710
458
Security and Commodity Brokers
8.02
7.45
6,03
21.49
0.6%
88.11%
151
124
Apparel Made From Purchased Materials
15.03
0.55
5.29
20.87
0.5%
68.60%
901
612
Other State and Local Got Enterprises
12.10
2.27
5.39
19.77
0,5%
89,0596
880
505
Religious Organizations
13,83
0,00
4.21
17.84
0.4%
69.46%
522
State & Local Government- Education
0.00
0.00
0.00
0.00
0.00%
100.00%
523
State & Local Government - Non -Education
0.00
0.00
0.00
0.00
0.00%
100.00%
524
Rest Of The World Industry
0.00
0.00
0.00
0.00
0.00%
100.00%
526
Dummy
0.00
0.00
0.00
0.00
0.00%
100.00%
527
Dummy
0.00
0.00
0.00
0.00
0.00%
100.00%
526
Inventory Valuation Adjustment
0.00
0.00
0.00
0.00
0.00%
100.00%
'Number of Jobs generated
by
$387,681,00 In PCE
2,573.72
617.10
1,139.60
4,330.42
Rescaled to Prototype 3 a $387,681 In PCE
2.67372
0,61710
1.13860
4.33042
SOWONeWAa'LNr MigT3da Page rataA, Inc. MNO
MULTI -FAMILY PROTOTYPE #4 --CONDOS (Higher -Cost Area)
1990 Cenus
IMPLAN
Cumulative
sic
Sector
Industry
Direct'
Indirect'
Induced'
Total'
Percent
Percent
641
454
Eating & Drinking
450.67
19.64
180.83
631.14
11.496
11.4%
682
455
Miscellaneous Retail
265.47
4.27
98.01
367.75
6,696
18.096
620
490
Doctors and Dentists
233.78
0.00
81.40
315.18
5.796
23.7%
5xx
447
Wholesale Trade
138.08
51.81
68.84
258.74
4.796
28.4%
031
492
Hospitals
163.10
0.02
70.40
233,52
4.296
32.6%
600
449
General Merchandise Stores
145.47
2.07
49.59
197.14
3.696
38,1%
611
450
Food Stores
130.30
3.07
52.81
186.18
3.496
39.5%
612 621
451
Automotive Dealers & Service Stations
116.27
3.14
44,02
163.43
2.9%
42.4%
610
488
Amusement and Recreation Services, N.E.C.
97.33
0.70
31.84
129.67
2.396
44.6%
860
498
Colleges, Universities, Schools
84.59
6.30
27.23
118.12
2.196
46.9%
761
525
Domestic Services
62.73
0.00
28.65
111.59
2,0%
48.9%
623
452
Apparel & Accessory Stores
74.74
0.56
28.30
101.80
1.8%
50.6%
712
462
Real Estate
24.78
45.49
31.14
101.41
1.8%
52.6%
731
474
Personnel Supply Services
5.66
68.31
26.66
100.63
1.8%
54.4%
700 701
456
Banking
53,62
12.32
25.49
91.44
1.696
56.1%
631
453
Furniture & Home Furnishings Stores
66.07
0.73
22,26
89.06
1.6%
57.7%
711
459
Insurance Carriers
61.56
4.10
20.56
86.22
1.6%
59,2%
842
495
Elementary and Secondary Schools
63.52
0.00
16.49
80.01
1.496
60.7%
871
500
Social Services, N.E.C.
60.14
0.59
18,75
79.49
1.4%
62.1%
772 760
466
Beauty and Barber Shops
48.25
9.35
21.19
78.80
1.4%
63.5%
762
463
Hotels and Lodging Places
43.43
15.61
18.80
77.84
1.496
64.9%
702
457
Credit Agencies
28.37
28.04
19.63
76.04
1,4%
68.3%
840
493
Other Medical and Health Services
48,80
7.97
20.04
74.61
1.3%
67.6%
761
479
Automobile Repair and Services
46.89
4.95
17,14
86.98
1.2%
68.9%
771
464
Laundry, Cleaning and Shoe Repair
33.55
13.99
16.32
63.86
1.2%
70.0%
832
491
Nursing and Protective Care
31.58
0,00
31.81
63.40
1.1%
71.2%
841
494
Legal Services
28.45
17.80
18.10
62.35
1.1%
72.3%
873
504
Labor and Civic Organizations
46.87
0.09
15.25
62.21
1.1%
73.4%
600 681 682
448
Building Materials & Gardening
46.19
0,20
14,69
61109
1.1%
74.5%
410 411
435
Motor Freight Transport and Warehousing
21.84
20.66
15.00
57.50
1.0%
75,8%
870
501
Residential Care
43.12
0.00
13.32
56.44
1.0%
76.6%
60
58
Maintenance and Repair Other Facilities
0.00
40,14
14,39
54.53
1.0%
77.6%
741
470
Other Business Services
3.51
33.82
13.22
50.55
0.996
78,5%
711
460
Insurance Agents and Brokers
0.00
35.83
11.22
47.05
0.8%
79.3%
890
507
Accounting, Auditing and Bookkeeping
1.24
31.32
11.56
44.12
0.8%
80.1%
862
499
Child Day Care Services
30.82
0.00
9.30
40.11
0.7%
80.9%
722
472
Services To Buildings
7.95
20.52
10.64
39.10
0.7%
81.6%
860
497
Other Educational Services
27.44
IIA4
9.07
37.84
0.7%
62.2%
732
475
Computer and Data Processing Services
1.48
25,22
9.50
36.16
0.7%
82.9%
412
513
U.S. Postat Service
7.76
18.62
9.16
35.56
0.696
83,5%
872
502
Other Nonprofit Organizations
25.71
0.56
8.20
34.49
0.6%
84.2%
892
508
Management and Consulting Services
0.02
25A8
9.21
34.32
0.6%
64.8%
441442
441
Communications, Except Radio and TV
16.55
7.92
9.58
34.04
0.696
65.4%
810
489
Membership Sports and Recreation Clubs
24.05
0.85
8.18
33.08
0.6%
86.0%
60
55
Maintenance and Repair, Residential
0.00
23,56
7.89
31.48
0.6%
86.6%
791
468
Miscellaneous Personal Services
22.82
0.20
7.5B
30.60
0.696
87,1%
740
476
Detective and Protective Services
8.28
12.86
7.42
28.54
0.5%
67.6%
710
458
Security and Commodity Brokers
10.26
9.53
7.71
27,51
0.5%
88.1%
161
124
Apparel Made From Purchased Materials
19.24
0.71
6.77
26.72
0,596
68.6%
901
512
Other State and Local Govt Enterprises
15.49
2.91
6.90
25.31
0.5%
89.1%
880
505
Religious Organizations
17,45
0.00
5.39
22.84
0.496
89.5%
522
State & Local Government • Education
0.00
0.00
0.00
0.00
0.0%
100.0%
523
State & Local Government - Non -Education
0.00
0.00
0.00
0.00
0.096
100.0%
524
Rest Of The World Industry
0.00
0,00
0.00
0.00
0.0%
100.096
526
Dummy
0.00
0.00
0.00
0.00
0.0%
100.0%
527
Dummy
0.00
0.00
0.00
0.00
0,096
100.0%
528
Inventory Valuation Adjustment
0.00
0.00
0,00
0.00
0.0%
100.096
"Number of Jobs
generated by $496,260,000 in PCE
3,294.55
769.93
1,456.77
5,543.25
Rescaled to Protolypa 4 = S406,260 in PCE
3.29455
0.78993
1 A5977
5.54325
SeMoXoA PLVWo4hlphils Pogo HnsA. Inc. 71760
Appendices
APPENDIX B
Estimates of the Capital Subsidy Needed to Develop an Affordable Rental Unit
in the City of Santa Monica Under Alternative Affordability Thresholds,
Land Costs and Unit Sizes
New Multi Family Development -Affordable Housing Nexus July 7, 1998
Hamilton, Rabinovitz & Alschuler, Inc.
Appendices
APPENDIX C
Derivation of a Development Fee for Four Prototypical
New Market Rate Multi -Family Developments in the City of Santa Monica
New Afulii-Family Development -Affordable Housing Nexus July 7, 1998
Hamilton, Rahinovitz & Alschuler, Inc.
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NEW CONSTRUCTION DEVELOPMENT COSTS
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135 i - R.SM1,000 f 2,85 $
N 9
131 f
B 9
- Pade8C;lyudaAlitlrypiMlwi;Wad
- Pa Uea CNywOanNIN440elm:Waq
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9tlaN
f
BO],)50 i
8D.]I] S - $1,056000 f
41000
caaOaUlo•
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10.000 f
e]J f 10,Ow Nmrce f 10,000 i
e]J i
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`31Va.
f86k150.N f
1340.000
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96,000 f 1.1)6.000 f6„Ltlp.al 9 8,000 S
9a,000 f
1.178.000 Pa Dia CNyvdaNRn9p3Mwa; bRad
Po44np
q1-ife 180aawvei
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f
20,350 i N;OW it],SAO/wem i 34].000 f
iO,YA f
34],000 beq Cp Warn9lry WOdwi;MMipe
1ib1cay0npaRy
10%x MN cep{ i
5%rOerY mala i
t 1.605,400
117,600 i
54,1M S
i
9.400 i 1176M 10%x74N 4opi 600 3
4,900 f 1 59,Eo0 SN aleN mps f 1150.000 f
, 6- 9 605,100 i ,605,400 i
100 i
4,900 f
, 6- 9
Pa HR6A
158,000 Pa Ciy ft vaan61N9+ONm:lONaq
1,605,400
ROInNo7elf•n
NdNemnVEnNwR17O
5%aNd.eW nrai f
60570 f
6.689 i 80,}70 5 • i 802)0 f
6669 i
L 70 Pa CRY a eRMdaNRn9MeaFwi; b•ad
1*1_Rvdanillrq
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3.000 S
167 i 3,000 f 3,000 i
167 f
;000 Pa gJpeUYi py y,0
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1 -mo i
5,000 i
6]J f 10,000 i 000 i
411 f 5,000 Nse f 15,000 S
Ell f
.17 i
10.000 Pa dryaeR MlOmnR'Do90Nam;6w, mE
5,000 Pa C<yeeR utlaniti�q piMmr, Mdrnq
DeaNylnOeda
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1;Ow S
000 f 13.000 N3nrce f t2,Ow 9
1308
1,000 i
5000 Pa CAyrtea udaNNrq 9a0Nwe; Mdnryv
1;500
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3.500 f
7,526 5
150000
f 500 Naem f 3,SOD S
4b f 4,]75 Aidwrce f )500 i
13.000
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I!Se 3
Pa ClrytreOumNMry pitlelwi:Ny, me
4,]75 Pa ClyrteR vdvnl0nO p40Nwe; BOR rM
CmmurWADE, Mew pamN
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4411 11 f 5,500 N 5
f x.000 oxide f 50000 i
417 $
4.187 9
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5
181.310 f
1
15,)56 i i 161.310 i
15.]36 i
168,845
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3
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29,000
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100 f
ll i - Nrwrce i 100 i
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f]LIln15-xJmoi, f
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10,800 i
21.4. s
900 i - i]OONNi]Rm. S TE.I�W L
1267 s 2e,oa0 s i
900 f
5.38! i
6
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1],6]9 163,838 e%rONY•uR•aDa i 18],826 i
13.618
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mpnr6m Lwn Fn
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1.0%xbin Nnwi f
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511%x Mexben S
18,000 i
36.000 f
110,500 3
3,167 i 31,000 f.0%alwnemPA1 f ]1,000 L
2,117 i - .O%ibnemP.•1 i ]1000 f
9.A1 i t0,5W 1505{arNa {ben f 131.750 f
131,359
5,54] t
3.56- i
10,919 t
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1]I,Tb Nauam a 5%le•n Me; bn. 100%x TNN De.p -Coat
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1?%aOeN mp•YMt f
}4.}59 i
2033 f %i(OW mN•YM) S 209 f
3.4]4 i
29.M9 EO%6100%xme14n 00 rd wMlawn marytlm
T emi1506Lx MF0
0.1%x(NN mM•Yn� i
- i
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f
19
1%x NN mpi f
9.f00 f
16054 i
800 S 9,fi00 fOWArp i 9800 f
1
6-B i 1,054 1%alaN wpi f 16,051 f
1667
a00 f
1,l]B L
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16,054 Pa HRLA
8a74 MONloMN
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6.000 f
Novi i 6.000 i
187 f
8600 Pa eiybeR ulONNNnO N(Fl ene
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S
4,503 a
334,91) f
1 4,4,000
P5 i 4.-ANwrce f 261,500 f
14,)1) i i 198,91] ,11] i
21115 f
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2500 Pd Cllytre6 a18anl0N UN ad
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TOTAL
f ;610,]10 i
ri;197 i ;1&,585 s ;-,.D 1
514,901 s
3,195,115
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1 ■m.r..� $422,316
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