Report Prepared by: Leah Brown, Management Analyst, Development Services
Title
SUBJECT: In-Lieu Fees and Regional Housing Needs Allocation (RHNA) Unit Production Plan Policy Amendments
REPORT IN BRIEF
Presentation on In-Lieu Fees following City Council’s guidance and possible amendments to the RHNA Unit Production Plan.
RECOMMENDATION
City Council - Consider the report and provide more defined direction on elements to include in future resolution to adopt in lieu fees.
Body
ALTERNATIVES
1. Approve, with adjustments to the fee based on area, such as AB3312 land, North Merced, South Merced; or,
2. Approve waiving or reducing the In-Lieu Fee for In-Fill development; or,
3. Approve with differing fees for land within the City and land in unincorporated areas; or,
4. Deny any changes and maintain direction given on August 21, 2023, to keep production requirement of 12.5% and set the fee based on 10%; or,
5. Continue to a future meeting (date to be specified in the motion).
AUTHORITY
City of Merced Charter, Section 200; et. seq.
CITY COUNCIL PRIORITIES
As provided for in the 2023-24 Adopted Budget and City Council’s Prohousing Policies
DISCUSSION
RSG, the City’s pro-housing feasibility consultant, gave a presentation to City Council on August 21, 2023, on the attached Final In-Lieu Fee Analysis and sought direction to confirm the percentage of affordable units the Council would like and to set the fees to determine the in-lieu fee calculation.
Questions came up regarding triggers for the affordable housing requirement in the RHNA Unit Production Plan (City Council Resolution 2022-15). Those triggers include a Legislative Action Agreement, Development Agreement, Pre-Annexation Development Agreement, or size of development.
RHNA makes it the City’s responsibility to have adequately zoned sites for development. The City’s RHNA Unit Production Plan has other options for meeting RHNA production goals, for example, a developer can pay an in-lieu fee instead of developing the deed restricted affordable units, the purpose of the In-Lieu Fee Analysis is to create a fee structure. Those In-Lieu fees would be deposited into the City’s newly created Affordable Housing Trust Fund and used to support other affordable housing production.
After some public input and discussion, City Council set the In-Lieu Fee based on 10%, incorporating a CCI annual adjustment to the fee, and enforcement to include revoking building permits (to be built into negotiated agreements). Additional direction included review of the fee to occur with each subsequent Housing Element update.
Immediately thereafter, there was discussion and a motion to amend the overall RHNA Production Policy to return to council for a future review of waiving inclusionary requirements within the existing City limits, to consider setting fees differently to make this policy only apply to new annexations, possibly setting different fees in North Merced, South Merced, the AB3312 land (the land around the University), and possibly exemption for infill areas.
Also, the Council wanted more information on how the calculation would work for developers who wish to build the homes for those at the moderate-income level, but pay the In-Lieu Fee for the low-income levels.
The next steps following Council direction, staff will return with a resolution to set the fee and any potential policy changes.
IMPACT ON CITY RESOURCES
No appropriation of funds is needed. The funds deposited from the affordable housing in-lieu fees will go into the City’s Affordable Housing Fund.
ATTACHMENTS
1. RHNA Unity Production Plan In-Lieu Fee Analysis
2. City Council Resolution 2022-15
3. Presentation - Partial On-Site Production and Partial In-Lieu Fee Payment