HomeMy WebLinkAbout2018-06-18 e-packet@6:00Monday, June 18, 2018
6:00 PM
City of South San Francisco
P.O. Box 711 (City Hall, 400 Grand Avenue)
South San Francisco, CA
City Hall, City Manager's Conference Room
400 Grand Avenue, South San Francisco, CA
Housing Standing Committee of the City Council and
Planning Commission
Special Meeting Agenda
June 18, 2018Housing Standing Committee of the
City Council and Planning
Commission
Special Meeting Agenda
NOTICE IS HEREBY GIVEN, pursuant to Section 54956 of the Government Code of the State of
California, the City Council and the Planning Commission Housing Standing Committee of the City of South San
Francisco will hold a Special Meeting on Monday, June 18, 2018, at 6:00 p.m., at City Hall, City Manager's
Conference Room, 400 Grand Avenue, South San Francisco, California.
Purpose of the meeting:
Call To Order.
Roll Call.
Public Comments.
MATTERS FOR CONSIDERATION
Motion to approve the Minutes from the meetings of March 12, 2018, March 13,
2018, March 20, 2018 and May 7, 2018.
1.
Report regarding inclusionary housing policies, City-owned property, commercial
linkage fee timeline, and other housing programs. (Nell Selander, Economic &
Community Development Deputy Director)
2.
Adjournment.
Page 2 City of South San Francisco Printed on 8/31/2018
City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #:18-526 Agenda Date:6/18/2018
Version:1 Item #:1.
Motion to approve the Minutes from the meetings of March 12, 2018, March 13, 2018, March 20, 2018 and
May 7, 2018.
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City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
File #:18-521 Agenda Date:6/18/2018
Version:1 Item #:2.
Report regarding inclusionary housing policies,City-owned property,commercial linkage fee timeline,and
other housing programs. (Nell Selander, Economic & Community Development Deputy Director)
RECOMMENDATION
Staff recommends that the Housing Standing Committee of the City Council and Planning Commission
(Committee)of the City of South San Francisco receive a presentation on further analysis conducted on
possible inclusionary housing policies,City-owned property,the timeline for commercial linkage fee
consideration, and other housing programs.
BACKGROUND
On February 14,2018,the City Council held a study session on Assembly Bill 1505,which expanded a
jurisdiction’s ability to require inclusionary affordable housing in rental developments.Council referred this
matter back to the Committee for additional policy discussions.On May 7,2018,staff presented additional
inclusionary housing policy analysis to the Committee,as well as an overview of commercial linkage fees,
included as Attachment 1. Staff received the following direction from the Committee.
·Prepare additional analysis regarding various inclusionary housing policies,including the impact of
requiring prevailing wage on a housing project’s feasibility,as well as reducing fees on market rate
projects that include below market rate (BMR) or affordable units.
·Confirm condominium and townhome market analysis from May 7,2018 using sales data from City
Ventures project.
·Move forward with developing a commercial linkage fee for Planning Commission recommendation
and City Council consideration. Bring back a timeline for implementation to the Committee.
·Provide analysis of advantages and disadvantages of live-work units.
·Provide a chart of all development projects in the pipeline.
·Provide a chart of all City fees.
·Provide a comprehensive list of all City-owned property.
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DISCUSSION
Inclusionary Housing Policies
On May 7,2018,staff presented analysis conducted by the City’s consultants,Baird +Driskell and Century |
Urban.The consultants modeled a 15 percent inclusionary housing requirement on a 150-unit apartment
complex,which typically would require a minimum of 18-20 percent profit in order to be deemed financially
feasible.In this example,and assuming current market conditions,if a developer were able to use the 25
percent density bonus with no additional costs,then the development would yield a 17.7 percent profit -which
falls just short of the 18 percent feasibility threshold.In the future,a 15 percent inclusionary requirement may
be feasible if rents increase faster than other development costs,including construction costs.Even small
changes in rental rate -i.e.,approximately 4 percent if all other costs stay the same -could make development
possible. This, however, is unlikely, given the unabated rise in construction costs over the past several years.
The Committee requested that staff prepare additional analysis of inclusionary housing policies,including the
impact of requiring prevailing wage on project feasibility,as well as reducing fees on market rate projects that
include BMR or affordable units. This analysis is detailed in Attachment 2 and summarized below.
Prevailing Wage
In their analysis,the City’s consultants assumed developers would not use prevailing wages to reflect actual
conditions in South San Francisco.Prevailing wages typically increase construction cost by 20 to 25 percent,
which make all modeled developments infeasible without outside subsidy.For example,in the 150-unit
multifamily rental development,assuming no affordable housing requirements,(hard)construction costs
increase from $290 per square foot to $348 per square foot (assuming a 20 percent increase in costs).This
reduces profit from 19.6 percent to 2.5 percent,making the project infeasible.The results are similar for all
developments modeled, with or without inclusionary affordable housing units.
Reducing Development Impact Fees
South San Francisco has relatively high fees for development.A worksheet outlining all development impact
fees is included as Attachment 3.In some cases,significantly reducing the fees for all units in the proposed
development would allow for higher affordable housing requirements,but this should be weighed against the
loss of revenue for the City.Fee reductions just for affordable units within a market rate development do not
provide much incentive,because only 10 to 20 percent of the units are affordable.Still,some cities do choose
to reduce the fees for just the affordable units as a way to show good will to developers.
In the 150-unit,multifamily rental development model,the consultants assumed fees of $30,000 per unit.This
development,with no affordability requirement,achieves a profit for 19.6 percent (target profitability for such a
project is 18 to 20 percent).If a 10 percent inclusionary affordable housing requirement is introduced and
coupled with a $5,000 reduction in fees for all units in the development,then the profit remains largely
unchanged - 19 percent.
The effect of fee reductions on the for-sale,condominium development model is less pronounced because the
cost to build is greater (due to larger units and higher end interiors).For the base model studied,assuming
inclusionary affordable housing units and a $5,000 fee reduction,the profit increases just 0.8 percent.Further,
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inclusionary affordable housing units and a $5,000 fee reduction,the profit increases just 0.8 percent.Further,
eliminating all fees,for all units in the development does not make a 20 percent affordable housing requirement
feasible.
Fee reductions are a potential incentive for townhome developments.However,this development is currently
feasible in South San Francisco with a density bonus and without fee reductions.In the modeled for-sale,
townhome development,reducing the impact fees by $10,000 per unit (at a total cost of $410,000 for the City)
would offset the cost to the developer of providing one additional affordable housing unit.
Staff Recommendation
When staff first presented to City Council regarding Assembly Bill 1505 and the City’s restored ability to
require inclusionary affordable housing in rental projects on February 14,2018,staff recommended the
following approach to amending the City’s Inclusionary Housing Ordinance.
1.Reduce the inclusionary requirement on for-sale developments from 20 percent to 10 percent, with half
of the units designated for moderate income households and half for low income households. As
demonstrated in the analysis provided in Attachment 1, condominium development in South San
Francisco is costly, with very thin profit margins. Reducing the requirement on condominiums will
reduce barriers to production of for-sale product in the City.
2.Phase in an inclusionary requirement on rental developments, beginning with five percent for low
income households, six months later ramping up to ten percent for low income households, and finally
six months after that changing the levels of affordability to half low income and half very low income.
After substantial research and analysis, staff continues to recommend the above-described approach to new
inclusionary affordable housing requirements on rental and for-sale developments.
City Development Impact Fees
As mentioned above,the City’s current development impact fees are listed in Attachment 3.In a development
of 150 multi-family,rental units,as modeled by the City’s consultants,the total development impact fee and
building permit fee burden is approximately $30,000 per unit.
Townhome Prices Confirmed
On May 7,2018,the Committee asked staff to confirm the historic sales prices for townhomes and
condominiums in South San Francisco using sales data from City Ventures’South City Place project.As
outlined in Attachment 4,the prices paid for units at South City Place are consistent with the estimated pricing
used in the townhome prototype analysis presented in the report to the Committee on May 7, 2018.
Live-Work Units
As further detailed in Attachment 4,the City’s consultant was tasked with researching the feasibility of utilizing
live-work housing as a means of creating affordable housing.Historically,live-work housing has not been a
successful means for creating affordable housing on any scale.In fact,live-work zoning designations have had
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a number of unexpected consequences, requiring cities to bar live-work developments.
San Francisco provides an instructive example.In 1988,San Francisco created a live-work ordinance with the
intention of providing affordable housing for artists and artisans.To incentivize the creation of these units,the
city eased restrictions on density,parking,lot coverage,and exempted live-work units from certain
development fees.Unfortunately,when the late 1990s tech boom created an increasing demand for housing in
San Francisco,live-work unit development was co-opted by developers as a way to create residential housing
more easily and cheaply. Over 2,000 live-work units were delivered in 1999.
Despite significant regulation requiring both tenant and landlord compliance to ensure the units went to artists
or artisans,live-work units ended up being rented or sold to highly paid professionals or to tech start-up
entrepreneurs at prices that were unaffordable to artists and artisans.By 2001,live work units commanded a
price premium of 32% over other housing types.
While it cannot be definitively stated that live-work housing would not advance the City’s affordable housing
objectives,the experience of other jurisdictions suggests that utilizing live-work housing should be carefully
studied before proceeding.
Commercial Linkage Fee Timeline
At its May 7,2018 meeting,the Committee asked staff to move forward with a commercial linkage fee -an
impact fee on certain commercial development to fund affordable housing.The Committee asked staff to
provide a timeline for implementation and reach out to stakeholders to discuss the implications of enacting a
commercial linkage fee.
Attachment 5 outlines a schedule for bringing forward an ordinance enacting a commercial linkage fee to
Planning Commission this July and to City Council in August.The dates are tentative and may change based on
how the Planning Commission and Council calendar change throughout the summer.If the City Council
chooses to adopt the Commercial Linkage fee,the fee would become effective after approval of the
implementing ordinance.Under Government Code section 60017,ordinances implementing new or higher
impact fees go into effect 60 days (rather than the normal 30 days) following adoption.
The implementation of the ordinance would determine applicability to pending (pipeline)projects.In addition
to laying out the requirement for the fee,it would include alternatives to payment,and the use of the fees.The
resolution establishes the particular fee amount and provides specifics about how to calculate the fee and what
uses are exempt.Each of these items will be discussed in depth when the item is brought forward to the City
Council.
As directed by the Committee,staff has proactively reached out to various stakeholders in the commercial
development community to begin a dialogue about the City’s consideration of a commercial linkage fee.
Specifically,staff reached out to the California Life Sciences Association (CLSA),Alexandria,CHP,BioMed
Realty,Biocom,Genentech,Phase 3,Lane Partners,and Prologis.Staff will continue to be in touch with these
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and other stakeholders throughout the implementation process.
Development Pipeline
Attachment 6 includes commercial and residential development projects that are under construction,approved,
and under formal review.The list of projects does not include those that are undergoing a preliminary Planning
Division project review.The pipeline serves as a barometer of medium to long-term development trends.It
illustrates location and scale of current and proposed construction.
City-Owned or Controlled Property
The City is the owner of substantial real property,which is used for various municipal and private
purposes.As public service needs change,the requirements for these properties may be revisited
and,on occasion,certain parcels may be in excess of the City’s current needs.This requires that
each individual site be reviewed in terms of its potential for future public use,as well as its potential
economic benefit to the City.The City currently has a State-approved Long Range Property
Management Plan (LRPMP)and a Housing Investment Plan (HIP),both of which guide the
disposition of certain assets.Attachment 7 includes a list of LRPMP properties,HIP properties,as
well as City parking lots, buildings, and parks and open space over 10,000 square feet.
CONCLUSION
As described above,staff continues to recommend a phased approach to introducing inclusionary affordable
housing requirements.This will allow land prices to adapt to the changing cost of construction in South San
Francisco and,ideally,ensure that the housing development pipeline does not stall as a result of new
inclusionary requirements.Staff requests direction from the Committee on how and if to proceed with
amending the City’s Inclusionary Housing Ordinance,and welcomes any additional feedback on
accommodating affordable housing on City-owned or controlled properties.
Attachments:
1.May 7, 2018 Housing Standing Committee Staff Report
2.Memo from Baird & Driskell Analyzing Prevailing Wage and Fee Reductions
3.Worksheet of South San Francisco Development Impact Fees
4.Memo from Century | Urban on Live-Work Units and Townhome Prices
5.Commercial Linkage Fee Timeline
6.Development Pipeline
7.City-Owned or Controlled Properties
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City of South San Francisco
Legislation Text
P.O. Box 711 (City Hall, 400
Grand Avenue)
South San Francisco, CA
Report regarding policy options for inclusionary rental housing and other affordable housing policies in
response to Assembly Bill 1505. (Nell Selander, Economic & Community Development Deputy Director)
RECOMMENDATION
Staff recommends that the Housing Standing Committee of the City Council and Planning Commission
(“Committee”)receive a presentation and provide direction to staff regarding:1)inclusionary housing
options for rental and for-sale development;2)the City’s ability to meet its Regional Housing Needs
Allocation (RHNA)given existing affordable housing policies;and 3)other tools that could be considered
to increase the production of affordable housing in South San Francisco.
BACKGROUND
On February 14,2018,City Council held a study session on Assembly Bill 1505,which expanded a
jurisdiction’s ability to require inclusionary affordable housing in rental developments.Staff presented
background information on the City’s existing Inclusionary Housing Ordinance,the need for affordable housing
in South San Francisco,and a recommendation to phase in inclusionary affordable housing in rental
developments, coupled with reevaluating the existing inclusionary requirement for for-sale projects.
The Council referred this matter back to the Housing Subcommittee for more detailed policy discussion,with a
specific focus on several questions (outlined below)as well as the City’s broader effort to address the need for
affordable housing:
·Is the inclusionary requirement for for-sale development the only factor contributing to the lack of for-
sale development in South San Francisco?Or are there other economic factors?Is this a regional
phenomenon or specific to South San Francisco?
·What will it take to be able to require 15 percent affordable units in market rate projects without making
residential development infeasible? Are City fees preventing requiring this level of affordability?
·Does the City have the ability to meet its Regional Housing Needs Allocation (RHNA)?
·What other tools can be used to increase the amount of affordable housing in new development?
To answer these questions,staff explored economic factors impacting the production of for-sale housing in
South San Francisco and compared these findings to other cities in the region.Additionally,staff further tested
the feasibility of residential rental development with a 15 percent inclusionary requirement,changing
assumptions such as fees,land value,rents,and construction costs to determine which impact feasibility most.
The analysis is presented later in the report.
To tackle the larger questions about the City’s ability to meet its RHNA share and tools that can be used to
induce or incentivize affordable housing production,staff considered the following options,which are
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induce or incentivize affordable housing production,staff considered the following options,which are
discussed in greater detail below:
·The City can use its affordable housing funds to partner with affordable housing developers to build
affordable housing utilizing low income housing tax credits and other funding mechanisms.
·The City can impose an affordable housing impact fee on commercial development to use as described
above.
·The City can donate or discount property to affordable housing developers to construct tax credit
projects.
·The City can waive fees or provide subsidies to developers to incentivize construction of more
affordable units, or units at a deeper level of affordability.
Regional Housing Needs Allocation
California requires each jurisdiction to prepare a Housing Element as part of its General Plan to ensure that all
jurisdictions are planning for the projected housing demand throughout the state.The process begins with the
State advising a region of their RHNA,which is the estimated number of housing units that will be needed over
the planning period. South San Francisco’s RHNA share for the planning period, 2015-2023, is 1,864 units.
The City issued 368 building permits for new residential units in 2017,bringing the City’s total during the
planning period to 515 units out of the 1,864 required.This upward trend in permit issuance is promising;
although there is still progress to be made at lower income categories.Attachment 1 shows the City’s progress
toward meeting its RHNA share by income category.
DISCUSSION
Achieving meaningful progress toward meeting the City’s RHNA share at all income levels will require using
more than just one housing program,like inclusionary requirements.A combination of strategies will be
particularly important for producing housing affordable to the community’s lowest earners -those in the very
low income category.Below are a number of approaches that the City can take to generate resources for
affordable housing and maximize utilization of existing resources.
Affordable Housing Funds
The City’s Affordable Housing Trust Fund (Fund 205)was created as a result of developer agreements and the
City’s Inclusionary Housing Ordinance.If developers were unable to incorporate affordable units into their
housing or commercial developments pursuant to the City’s Inclusionary Housing Ordinance,the City accepted
in-lieu fees in limited cases (e.g.Terrabay).In other cases,the City required a housing fee in addition to the
affordable units (e.g.Oak Farms).Most recently,$1.05 million from Fund 205 was set aside to subsidize the
affordable housing units in the Grand &Linden project being undertaken by ROEM Development.Fund 205
can only be used for the development of new affordable housing,serving income levels up to 120 percent of
area median income (AMI). Fund 205 has a balance of $2,579,611.
In 2011,the City established the Housing Successor Agency to manage and dispose of the former South San
Francisco Redevelopment Agency’s (RDA)housing assets;and the City also established the Housing Fund
(Fund 241)in the City Budget.Revenues from housing rental properties,RDA-funded loan repayments,and
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(Fund 241)in the City Budget.Revenues from housing rental properties,RDA-funded loan repayments,and
interest are deposited into this fund.The fund can be used to develop housing or for any other purposes that
advances the creation or preservation of affordable units,including new construction,first time homebuyer
loans,rehabilitation,and staff expenses consistent with past RDA law.Currently,these funds are being used for
housing related expenses including staff,maintenance,and other incidental expenses.Additionally,$2.45
million of these funds have been set aside as a grant to subsidize the affordable housing units in the Grand &
Linden project being undertaken by ROEM Development.The income levels served by this fund are tightly
controlled by Senate Bill 341;no funds may be spent on households above 80 percent of AMI.Fund 241 has a
balance of $1,120,172.
Typically,cities will release a request for proposals for qualifying projects and programs based on the amount
of money they have in their housing funds.San Mateo County is fortunate to have experienced affordable
housing developers and providers that can work with the City to build new affordable housing or manage
affordable housing programs.An advantage of this approach is that money given to affordable housing
developers and providers can leverage county,state or federal money -one local dollar can often bring in three
to nine outside dollars in matching resources.
Commercial Linkage Fee
A Commercial Linkage Fee is an impact fee on commercial development for affordable housing.They are
generally designed as a per square foot fee assessed on new non-residential construction such as office,hotel,
medical,retail and restaurants.An impact fee like a Commercial Linkage Fee requires drawing a nexus between
the new use and the impact being charged for.In this case,these new uses bring with them new workers,which
create a demand for housing.The primary focus of a Commercial Linkage Fee is to fund construction of
affordable housing to assist workers that make lower or moderate wages -those who cannot afford market rate
housing prices.
In 2015,“21 Elements”-which is a consortium of the County of San Mateo and every city in the County that
focuses on housing policy and implementation of housing element policies and goals -undertook a Grand
Nexus Study.Cities in the consortium could opt into the Grand Nexus Study,which looked at the connection
between commercial development and the need for affordable housing,as described above.South San
Francisco opted to participate;a Draft Commercial Linkage Fee Nexus Study was produced for the City.The
Nexus Study includes the maximum justifiable fee based on the nexus established (on a per square foot basis)
and a range of fees that could be assessed on new commercial development without diminishing the project’s
feasibility.
Use Maximum Justified Fee Recommended Linkage Fee
Hotel $130 $5 - $15
Retail/Restaurants/Services $230 $2.50 - $7.50
Office/Medical Office/R&D $192 $5 - $10
If the Committee recommends that City Council consider a Commercial Linkage Fee,staff would work with a
consultant to update the Nexus Study and feasibility analysis to account for new market conditions.Ultimately,
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consultant to update the Nexus Study and feasibility analysis to account for new market conditions.Ultimately,
if Council directs staff to prepare an ordinance for Council approval,provisions for the following would need to
be considered:
·Threshold for small projects under a certain square footage (10-20,000 square feet is common for
reduced or exemption of fees).
·Exemptions for certain types of space,such as onsite child care centers in office buildings,non-profits,
or public buildings including schools and churches.
·Provisions to address rehabilitation and conversion of space from one use to another.
·Alternative means of meeting the fee requirement, such as provision of land or housing.
·Consideration of incentive to encourage area standard wages.
·Mechanism to adjust fees in the future.
Other cities on the Peninsula who have adopted a Commercial Linkage Fee include:Menlo Park,Palo Alto,San
Carlos, East Palo Alto, Foster City, San Mateo, and Redwood City.
City/Successor Agency Property
Currently,the City has an array of housing and commercial land assets that are underutilized.The City’s
Housing Investment Plan (HIP),which applies to its Housing Successor Agency assets,seeks to provide
strategies to maximize the development of affordable and market-rate housing while aligning these efforts with
the City Council’s goals of improving the Downtown.The City currently owns and manages three residential
properties -a single family home and two small multi-family apartment buildings.Additionally,the Successor
Agency’s Long Range Property Management Plan (LRPMP)outlines the permissible uses for former
Redevelopment Agency properties - many are set aside for future development, which may include housing.
If it is the City Council’s priority to maximize affordable housing at these sites,a strategy can be developed by
staff and presented for Council consideration.HIP properties may be more easily designated exclusively for
affordable housing;whereas LRPMP properties may be mixed-income projects where the City may further
subsidize the affordable units,to deepen the level or affordability or increase the total number of affordable
units (as it did with the ROEM project).
Direct Financial Incentives
Some cities provide direct financial assistance,such as fee waivers,to market rate developers to help reduce or
eliminate the profit lost by creating affordable housing.While there is an intuitive appeal to this,many cities
conclude it is not the best use of resources.Municipal dollars are a limited and costly resource from a city’s
perspective,and often the same benefits for the developer can be achieved at no cost through zoning incentives,
such as density bonuses.Additionally,local contributions may trigger prevailing wage rules,which may
eliminate any benefit from the financial assistance.
Inclusionary Housing Requirements
California State Assembly Bill 1505 (Bloom),also referred to as the “Palmer Fix”for the court decision it
overrules,allows cities to require a portion of new market rate,rental developments to include affordable
housing provided an alternate means of compliance exists,such as in-lieu fees or off-site construction.Local
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housing provided an alternate means of compliance exists,such as in-lieu fees or off-site construction.Local
ordinances requiring more than 15 percent inclusionary units affordable to households earning 80 percent or
less of the area median income may be reviewed by the California Department of Housing and Community
Development (“HCD”)under certain circumstances.The City currently has an inclusionary housing ordinance
that applies to for-sale residential developments.As a result of AB 1505,the City may now consider adopting
an amendment to this ordinance extending the requirement to residential rental developments.
Density Bonus and the Cost of Construction
Often,the inclusionary housing requirements that cities adopt,on their face,appear to have a larger burden on
developers than impact fees.This is mitigated by the fact that by developing a certain percentage of affordable
housing (as required by an inclusionary housing ordinance)a developer can then use the State Affordable
Housing Density Bonus Law to build more market rate units.
A caveat to the benefits of the Density Bonus is that more units may change the construction type required to
build them and therefore increase the cost of construction,negating much of the benefit of the bonus.Wood is
relatively inexpensive to build with while concrete is comparatively costly.If the building codes allow the
developer to add an additional floor using wood construction,the density bonus is very valuable.If an extra
floor to accommodate the bonus units requires the construction of another floor of concrete podium,the
additional costs might eliminate much of the incentive.To reflect this complexity,the City’s consultants
assumed developers would use a 25 percent density bonus,even though they are entitled to a 35 percent bonus,
in the rental inclusionary housing scenarios analyzed.
Inclusionary Housing in For-Sale Developments
One of the challenges associated with the creation of more affordable for-sale housing in South San Francisco
is encouraging the production of more for-sale housing in general.From 2010 through 2016,no for-sale
condominium or townhome projects of any meaningful size were completed in the City.As of 2017,31 for-sale
townhome units were completed or under construction at City Ventures’South City Place development.In
contrast,during the same time period (2010-2016),approximately 2,023 for-sale units were built in San Mateo
County and 6,969 in Santa Clara County.This compares with 5,174 rental units in San Mateo County and
23,335 in Santa Clara County.
There are a variety of reasons for why there is a greater amount of rental apartment development during these
years,but major factors likely include the availability of financing for each product type during the early years
of the recession’s recovery,decreases in national home ownership rates and trends toward “rental-by-choice”
living,which have affected developer investment strategies,and the decreased numbers of for-sale housing
developers active in the real estate market after the impacts of the 2008-2010 recession.
With regard to South San Francisco,it is difficult to pinpoint a single definitive reason for the lack of new for-
sale housing development in the City,but comparisons with similar markets and the economics of project
development provides several insights.The closest relevant city comparisons in terms of population and size
are Redwood City,San Mateo,Mountain View and Daly City.From 2010 to 2017,the following numbers of
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residential units were created:
City Rental Units For-Sale Units Total Units
Redwood City 2,019 420 2,439
San Mateo 1,226 578 1,804
Daly City 123 227 350
Mountain View 1,541 678 2,219
South San Francisco 109 31 140
A variety of factors may affect the desirability of developing for-sale residential projects in a given city,but a
major driver of development is sufficient profitability to offset the risks of a project.This profitability is
projected by estimating the cost to build the project versus the net sale proceeds the project is anticipated to
generate from unit sales.In the comparison cities mentioned above,sales prices vary significantly for for-sale
housing. Average sales prices by city for for-sale units built and sold over the last three years are as follows:
City Price per Square Foot Approximate Price per Unit
Redwood City $802 per square foot $1,260,000
San Mateo $818 per square foot $1,340,000
Daly City $623 per square foot $920,000
Mountain View $917 per square foot $1,380,000
Because no projects were completed in South San Francisco during this time period,it is not possible to
compare these prices directly against South San Francisco for-sale housing of the same vintage.However,
South San Francisco does have inventory built from 2007 to 2009 which sold for approximately $658 per
square foot or $706,000 per unit.Assuming these earlier prices,sales costs reflect that if a developer were to
build a unit for the same price in all five markets,South San Francisco would potentially be the least profitable
place (on a per unit basis) relative to its comparable cities on the Peninsula.
Additionally,total project development costs are not the same across these cities.While hard and certain soft
costs are similar in competitive markets,other factors affect the total project development costs,including:land
costs,city fees or requirements,approval timeframes,and soil/ground development costs.One type of city fee
or requirement is the affordable housing requirement for for-sale housing,which varies across the comparison
cites:
City Inclusionary Affordable Housing Requirement
Redwood City None. Since 2015 they have had an affordable impact fee.
San Mateo 15% of units at moderate income or 10% of units at low income.
Daly City 20% of units at moderate income or in lieu alternatives.
Mountain View 10% of units at median income.
South San Francisco currently requires 20 percent of units at a mixture of low and moderate income,which is
the highest requirement of the group.The additional cost of the requirement is somewhat offset by lower land
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the highest requirement of the group.The additional cost of the requirement is somewhat offset by lower land
costs in South San Francisco;however,the total cost of development relative to sale prices is still not profitable
enough to support new development.
To determine what level of affordability would be feasible in for-sale developments in South San Francisco,the
City’s consultant examined the costs and net sale values of two for-sale prototypes:a 100-unit condominium
project and a 35-unit townhome project.The results of these analyses are summarized below and presented in
Attachment 2.
The 100-unit condominium is only marginally feasible (15.1 percent profit)with no affordable requirements,
and not feasible at all with 10 or 20 percent of the units affordable.Even though the prototype is technically
feasible if there are no affordable requirements,in most cases developers will probably build rental
developments,because they are more profitable.The profit threshold required to induce condominium
development is 15-20 percent for the condominium.With the current inclusionary housing requirement and a
15 percent density bonus,the development cost (without profit)is barely more than the sales price,leaving a
3.5 percent profit.If the inclusionary requirement were 10 percent with a 5 percent density bonus,the
development would still be infeasible (8.7 percent profit).Additionally,the development is infeasible at 20
percent of the units affordable to moderate income households (4.3 percent profit).
For the 35-unit townhome development,the profitability depends heavily on the ability to use the density
bonus.Another factor making it more likely that townhomes will prove feasible is lower profit thresholds.
Townhomes are simple and faster to build,with less risk,so developers are willing to accept lower profits.The
profit needed to induce development of townhomes is 12-17 percent.Additionally,small sites are of less
interest to rental developers because the ongoing management costs are spread between fewer units.
The townhome project is feasible with 10 percent affordable housing requirements with or without a density
bonus (17.9 percent and 14.7 percent profit)or 20 percent affordable requirements and a 15 percent density
bonus (18.1 percent profit).
Generally,it appears that the inclusionary requirements are a factor that limits ownership developments in
South San Francisco.Without the inclusionary requirement,for-sale development may be more feasible,but
there are many factors affecting the likelihood of the City receiving for-sale development proposals.
Potential profits are summarized below:
Profit Target
Condominium Development
No affordable units 15.1%15-20%
Condo - 10% affordable, 5% density bonus 8.7%15-20%
Condo - 20% affordable, 15% density bonus 3.5%15-20%
Townhome Development
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No affordable units 23.0%12-17%
10% affordable, 5% density bonus 17.9%12-17%
10% affordable, no density bonus 14.7%12-17%
20% affordable, 15% density bonus 18.1%12-17%
20% affordable, no density bonus 8.6%12-17%
Inclusionary Housing in Rental Developments
On February 14,2018,staff presented several options for phasing in a ten percent inclusionary housing
requirement on rental developments.Council directed staff to look at achieving a 15 percent inclusionary
housing requirement.
A 15 percent requirement will affect projects in the planning stages differently than theoretical projects,where
the land has not yet been purchased for development.Some developments in the planning stages may be able to
proceed with a 15 percent inclusionary requirement,if they are able to utilize a 25 percent density bonus,while
others may not proceed. The most important factor is if developers could effectively use the state density bonus.
For projects for which the land has not yet been purchased,developers will typically respond to an increase in
the inclusionary housing requirement by paying less for land.That said,it is unlikely land prices will come
down enough to enable housing development because the land can more profitably be utilized for other uses
that are not subject to inclusionary housing requirements.Under today’s market conditions,land prices would
have to drop by 55 percent to maintain the same developer profit with a 15 percent inclusionary housing
requirement (and no density bonus).The City’s consultant believes that some development proposals would be
paused or abandoned with the 15 percent requirement.
In the future,a 15 percent inclusionary requirement may be feasible if rents increase faster than other
development costs,including construction costs.Even small changes in rental rate -i.e.,approximately 4
percent if all other costs stay the same -could make development possible.This,however,is unlikely,given the
unabated rise in construction costs over the past several years.
The consultants modeled a 150-unit apartment complex,which typically would require a minimum of 18-20
percent profit in order to be deemed financially feasible.In this example,and assuming current market
conditions,if a developer were able to use the 25 percent density bonus with no additional costs,then the
development would yield a 17.7 percent profit -which falls just short of the 18 percent feasibility threshold.By
contrast,if the developer can only use a 10 percent density bonus,then the development would only yield a
15.9 percent profit and would not be feasible.However,if rents increase by 4 percent,then the development
becomes more realistic,yielding 20.4 percent profit (with a 10 percent density bonus)and 22.4 percent profit
(with a 25 percent density bonus).The results are further detailed in Attachment 2,with an additional measure
of feasibility, yield on cost, included.
CONCLUSION
Committee guidance provided at this study session will inform staff’s next steps,which may include some or
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Committee guidance provided at this study session will inform staff’s next steps,which may include some or
all of the following:
·Drafting Zoning Ordinance Amendments to modify the for-sale inclusionary housing requirement.
·Drafting Zoning Ordinance Amendments to extend the inclusionary housing program to rental
developments.
·Drafting an ordinance to adopt a Commercial Linkage Fee.
·Preparation of a Request for Proposals for affordable housing programs or projects.
Attachments
1.RHNA Table
2.Modeling of Inclusionary Housing Requirement Prototypes
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Attachment #2
Large rental, 15% inclusionary at 80% AMI, today’s condition, 25% density bonus
Project Summary Studio 1br 2br 3br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200
Base Market-Rate Units 12 65 44 6 127 67.55% 93,850
Bonus Units 4 19 13 2 38 20.21% 28,050
Total Market-Rate Units 16 84 57 8 165 87.77% 121,900
Affordable Units: 80% AMI 2 12 8 1 23 12.23% 17,000
Total Affordable Units 2 12 8 1 23 12.23% 17,000
Total Project Units 18 96 65 9 188 100% 138,900
Project Size sq. feet
Unloaded Area 138,900
Common Area 34,725
Commercial Space 0
Total Built Area 173,625
Site Area 54,450
Floor Area Ratio 3.19
Dwelling Units/Acre 150.40
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,810 $2,601 $3,397 $3,981 $364,139 70.41%
Bonus Unit Total $1,810 $2,601 $3,397 $3,981 $117,589 21.03%
Affordable Level (80% AMI) $1,614 $1,845 $2,075 $2,306 $44,275 8.56%
Gross Potential Income / mo $32,188 $240,621 $210,232 $34,154 $555,492 100%
Rental Income & Project Value
Gross Potential Income (annual) $6,206,354
Less Vacancy $310,318
Gross Rental Income $5,896,037
Less Operating Costs $2,063,613
Net Operating Income (NOI) $3,832,424
Cap Rate 4.25%
Project Value $90,174,679
Cost Analysis $ % of TDC
Construction Costs $50,351,250 65.74%
Residential Impact Fees $5,640,000 7.36%
Soft Costs $15,105,375 19.72%
SubTotal Hard and Soft Costs $71,096,625 92.82%
Land Costs $5,500,000 7.18%
Total Development Cost (TDC) $76,596,625
TDC Per Unit $407,429
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $13,578,054 17.73% 5.0%
Minimum Profit $13,787,393
Is Project Feasible? No
Value Capture Opportunity -$209,239
Parking % #
Base Parking Ratio 125% 235
Large rental, 15% inclusionary at 80% AMI, 4% increase in rents, 10% density bonus
Project Summary Studio 1br 2br 3br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200
Base Market-Rate Units 12 65 44 6 127 76.97% 93,850
Bonus Units 1 8 5 1 15 9.09% 11,300
Total Market-Rate Units 13 73 49 7 142 86.06% 105,150
Affordable Units: 80% AMI 2 12 8 1 23 13.94% 17,000
Total Affordable Units 2 12 8 1 23 13.94% 17,000
Total Project Units 15 85 57 8 165 100% 122,150
Project Size sq. feet
Unloaded Area 122,150
Common Area 30,538
Commercial Space 0
Total Built Area 152,688
Site Area 54,450
Floor Area Ratio 2.8
Dwelling Units/Acre 132
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,888 $2,713 $3,544 $4,153 $379,88 80.9%
Bonus Unit Total $1,888 $2,713 $3,544 $4,153 $45,469 9.7%
Affordable Level (80% AMI) $1,614 $1,845 $2,075 $2,306 $44,275 9.4%
Gross Potential Income / mo $27,776 $220,223 $190,255 $31,378 $469,633 100%
Rental Income & Project Value
Gross Potential Income (annual) $5,635,590
Less Vacancy $281,780
Gross Rental Income $5,353,811
Less Operating Costs $1,873,834
Net Operating Income (NOI) $4,116,197
Cap Rate 4.25%
Project Value $81,881,815
Cost Analysis $ % of TDC
Construction Costs $44,279,375 65.1%
Residential Impact Fees $4,950,000 7.28%
Soft Costs $13,283,813 19.5%
SubTotal Hard and Soft Costs $62,513,188 91.9%
Land Costs $5,500,000 8.1%
Total Development Cost (TDC) $68,013,188
TDC Per Unit $412,201
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $13,868,627 20.39% 5.12%
Minimum Profit $12,242,374
Is Project Feasible? Yes
Value Capture Opportunity $1,626,253
Parking % #
Base Parking Ratio 125% 206
Large rental, 15% inclusionary at 80% AMI, 4% increase in rents, 25% density bonus
Project Size sq. feet
Unloaded Area 138,900
Common Area 34,725
Commercial Space 0
Total Built Area 173,625
Site Area 54,450
Floor Area Ratio 3.19
Dwelling Units/Acre 150.40
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,888 $2,713 $3,544 $4,153 $379,88 70.7%
Bonus Unit Total $1,888 $2,713 $3,544 $4,153 $45,469 21.11%
Affordable Level (80% AMI) $1,614 $1,845 $2,075 $2,306 $44,275 8.23%
Gross Potential Income / mo $33,441 $250,071 $218,607 $35,531 $469,633 100%
Rental Income & Project Value
Gross Potential Income (annual) $6,451,805
Less Vacancy $322,590
Gross Rental Income $6,129,215
Less Operating Costs $2,145,225
Net Operating Income (NOI) $3,983,989
Cap Rate 4.25%
Project Value $93,740,929
Cost Analysis $ % of TDC
Construction Costs $50,351,250 65.7%
Residential Impact Fees $5,640,000 7.36%
Soft Costs $15,105,375 19.7%
SubTotal Hard and Soft Costs $71,096,625 92.82%
Land Costs $5,500,00 7.18%
Total Development Cost (TDC) $76,596,625 100%
TDC Per Unit $407,429
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $17,144,304 22.38% 5.2%
Minimum Profit $13,787,393
Is Project Feasible? Yes
Value Capture Opportunity $3,356,912
Project Summary Studio 1br 2br 3br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200
Base Market-Rate Units 12 65 44 6 127 67.55% 93,850
Bonus Units 4 19 13 2 38 20.21% 28,050
Total Market-Rate Units 16 84 57 8 165 87.77% 121,900
Affordable Units: 80% AMI 2 12 8 1 23 12.23% 17,000
Total Affordable Units 2 12 8 1 23 12.23% 17,000
Total Project Units 18 96 65 9 188 100% 138,900
Parking % #
Base Parking Ratio 125% 235
Condominium Development, 20% Affordable, No Density Bonus
Project Summary 2br 3br Total %
Approximate Market Unit Size 1,080 1,250
Base Market-Rate Units 40 40 80 80%
Total Market-Rate Units 40 40 80 80%
Approximate Affordable Unit Size 1,050 1,200
Affordable Units: Level Low 5 5 10 10%
Affordable Units: Level Mod 5 5 10 10%
Total Affordable Units 10 10 20 20%
Total Project Units 50 50 100 100%
Project Size sq. feet
Unloaded Area 115,700
Common Area 28,925
Total Built Area 144,625
Site Area 43,560
Sales Prices 2br 3br Total
Market-Rate Units $864K $1 M $74.560 M
Affordable Level Low $264K $299K $3.140 M
Affordable Level Mod $348K $393K $3.550 M
Revenue & Project Value
Gross Sales Proceeds $81,250,000
Sales Marketing Cost $4,062,500
Net Project Value $77,187,500
Cost Analysis $ % of TDC
Construction Costs $55,102,125 72.1%
Residential Impact Fees $3,000,000 3.93%
Soft Costs $14,326,553 18.74%
SubTotal Hard and Soft Costs $72,428,678 94.77%
Land Costs $4,000,000 5.23%
Total Development Cost (TDC) $76,428,678
TDC Per Unit $764,387 Profit as % of TDC
Profitability Profit as % of TDC
Estimated Profit $758,823 0.99%
Condominium, 10% affordable, 5% density bonus
Project Summary 2br 3br Total % Area (sq ft)
Approximate Unit Size 1,080 1,250
Base Market-Rate Units 45 45 90 86% 104,850
Bonus Units 2 3 5 5% 5,910
Total Market-Rate Units 47 48 95 91% 110,760
Total Affordable Units* 5 5 10 10% 11,250
Total Project Units 52 53 105 100% 122,010
*Affordable 2 bedroom is 1,050 sq. feet and 3 bedroom is 1,200 sq. feet
Note: Percentages may not sum to total due to rounding
Project Size acres sq. feet
Unloaded Area 122,010
Common Area 30,503
Total Built Area 152,513
Site Area 1 43,560
Floor Area Ratio 3.50
Dwelling Units/Acre 105.00
Parking % #
Base Parking Ratio 125% 131
Parking Reduction Incentive 0% 0
Net Parking Ratio 124.76% 131
Price Schedule 2br 3br Gross Sales
Proceeds
%
Market-Rate Units $864,000 $1,000,000 $83,880,000 91%
Bonus Unit Total $864,000 $1,000,000 $4,728,000 5%
Affordable $314,000 $355,000 $3,345,000 4%
Gross Sales Proceeds $42,178,000 $49,775,000 $91,953,000 100%
Note: Low and moderate housing prices were averaged for simplicity
Revenue & Project Value
Gross Sales Proceeds $91,953,000
Sales Marketing Cost $4,597,650
Net Project Value $87,355,350
Cost Analysis $ % of TDC
Construction Costs $58,107,263 72.3%
Parking Costs $0 0%
Residential Impact Fees $3,150,000 3.92%
Affordable Housing Fee $0 0%
Condo "Wrap" Insurance $0 0%
Soft Costs $15,107,888 18.8%
Other development costs $0 0%
SubTotal Hard and Soft Costs $76,365,151 95.02%
Financing Costs
Cash Subsidy for Affordable Housing $0 0%
Construction Loan Amount $56,255,606 70%
Interest on Construction Loan $0 0%
Points on Construction Loan $0 0%
Land Costs $4,000,000 4.98%
Total Development Cost (TDC) $80,365,151
TDC Per Unit $765,382
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $6,990,199 8.7% 0%
Minimum Profit $12,054,773
Is Project Feasible? No
Value Capture Opportunity $-5,064,573
Condominium, no affordable, no density bonus
Project Summary 2br 3br Total % Area (sq ft)
Approximate Unit Size 1,080 1,250
Base Market-Rate Units 50 50 100 100% 116,500
Bonus Units 0 0 0 0% 0
Total Market-Rate Units 50 50 100 100% 116,500
Total Affordable Units* 0 0 0 0% 0
Total Project Units 50 50 100 100% 116,500
*Affordable 2 bedroom is 1,050 sq. feet and 3 bedroom is 1,200 sq. feet
Note: Percentages may not sum to total due to rounding
Project Size acres sq. feet
Unloaded Area 116,500
Common Area 29,125
Total Built Area 145,625
Site Area 1 43,560
Floor Area Ratio 3.34
Dwelling Units/Acre 100.00
Parking % #
Base Parking Ratio 125% 125
Parking Reduction Incentive 0% 0
Net Parking Ratio 124.76% 125
Price Schedule 2br 3br Gross Sales
Proceeds
%
Market-Rate Units $864,000 $1,000,000 $93,200,000 100%
Bonus Unit Total $864,000 $1,000,000 $0 0%
Affordable $314,000 $355,000 $0 0%
Gross Sales Proceeds $43,200,000 $50,000,000 $93,200,000 100%
Note: Low and moderate housing prices were averaged for simplicity
Revenue & Project Value
Gross Sales Proceeds $93,200,000
Sales Marketing Cost $4,660,000
Net Project Value $88,540,000
Cost Analysis $ % of TDC
Construction Costs $55,483,125 72.14%
Parking Costs $0 0%
Residential Impact Fees $3,000,000 3.9%
Affordable Housing Fee $0 0%
Condo "Wrap" Insurance $0 0%
Soft Costs $14,425,613 18.76%
Other development costs $0 0%
SubTotal Hard and Soft Costs $72,908,738 94.8%
Financing Costs
Cash Subsidy for Affordable Housing $0 0%
Construction Loan Amount $53,836,116 70%
Interest on Construction Loan $0 0%
Points on Construction Loan $0 0%
Land Costs $4,000,000 5.2%
Total Development Cost (TDC) $76,908,738
TDC Per Unit $769,087
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $11,631,263 15.12% 0%
Minimum Profit $11,563,311
Is Project Feasible? Yes
Value Capture Opportunity $94,952
Townhome Development, 20% affordable, no density bonus
Price Schedule 3br 4br
Market-Rate Units $845,000 $1,020,000
Number of market units 16 12
Size 1450 1700
Affordable Level Low $299,000 $327,000
Affordable Level Mod $393,000 $428,000
Number of aff units 4 3
Size 1350 1550
Common space 0%
Site Area 1.25 acres
Revenue & Project Value
Gross Sales Proceeds $28,342,800
Sales Marketing Cost $3,967,992
Net Project Value $24,374,808
Cost Analysis $ % of TDC
Construction Costs $10,730,000 47.79%
Residential Impact Fees $1,050,000 4.68%
Soft Costs $1,049,394 4.67%
Other development costs $1,750,000 7.79%
SubTotal Hard and Soft Costs $14,579,394 64.93%
Land Costs $7,875,000
Total Development Cost (TDC) $22,454,394
TDC Per Unit $641,554
Profit $1,920,414 8.55% of TDC
Townhomes, 10% affordable, 5% density bonus
Project Summary 3br 4br Total % Area (sq ft)
Approximate Unit Size 1,450 1,700
Base Market-Rate Units 17 14 31 84% 48,5450
Bonus Units 1 1 2 5% 3,150
Total Market-Rate Units 18 15 33 89% 51,600
Total Affordable Units* 2 2 0 11% 5,800
Total Project Units 20 17 37 100% 57,400
*Affordable 3 bedroom is 1,350 sq. feet and 4 bedroom is 1,550 sq. feet
Project Size acres sq. feet
Unloaded Area 57,400
Total Built Area 57,400
Site Area 1 54,450
Floor Area Ratio 1.05
Dwelling Units/Acre 29.60
Parking % #
Base Parking Ratio 125% 46
Parking Reduction Incentive 0% 0
Net Parking Ratio 124.32% 46
Price Schedule 3br 4br Gross Sales
Proceeds
%
Market-Rate Units $845,000 $1,020,000 $28,645,000 89%
Bonus Unit Total $845,000 $1,020,000 $1,865,000 6%
Affordable $355,000 $387,600 $1,485,200 5%
Gross Sales Proceeds $15,920,000 $16,075,200 $31,995,200 100%
Note: Low and moderate housing prices were averaged for simplicity
Revenue & Project Value
Gross Sales Proceeds $31,995,200
Sales Marketing Cost $4,479,328
Net Project Value $27,515,872
Cost Analysis $ % of TDC
Construction Costs $11,480,000 49.19%
Parking Costs $0 0%
Residential Impact Fees $1,110,000 4.76%
Affordable Housing Fee $0 0%
Condo "Wrap" Insurance $0 0%
Soft Costs $1,122,744 4.81%
Other development costs $1,750,000 7.5%
SubTotal Hard and Soft Costs $15,462,744 66.26%
Financing Costs
Cash Subsidy for Affordable Housing $0 0%
Construction Loan Amount $16,336,421 70%
Interest on Construction Loan $0 0%
Points on Construction Loan $0 0%
Land Costs $7,875,000 33.74%
Total Development Cost (TDC) $23,337,744
TDC Per Unit $630,750
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $4,178,128 17.9% 0%
Minimum Profit $2,800,529
Is Project Feasible? Yes
Value Capture Opportunity $1,377,599
Townhomes, 20% affordable, 15% density bonus
Project Summary 3br 4br Total % Area (sq ft)
Approximate Unit Size 1,450 1,700
Base Market-Rate Units 16 12 28 68% 43,600
Bonus Units 3 3 6 15% 9,450
Total Market-Rate Units 19 15 34 83% 53,050
Total Affordable Units* 4 3 7 17% 10,050
Total Project Units 23 18 41 100% 63,100
*Affordable 3 bedroom is 1,350 sq. feet and 4 bedroom is 1,550 sq. feet
Project Size acres sq. feet
Unloaded Area 63,100
Total Built Area 63,100
Site Area 1 54,450
Floor Area Ratio 1.16
Dwelling Units/Acre 32.80
Parking % #
Base Parking Ratio 125% 51
Parking Reduction Incentive 0% 0
Net Parking Ratio 124.39% 51
Price Schedule 3br 4br Gross Sales
Proceeds
%
Market-Rate Units $845,000 $1,020,000 $25,760,000 76%
Bonus Unit Total $845,000 $1,020,000 $5,595,000 17%
Affordable $355,000 $387,600 $2,582,800 8%
Gross Sales Proceeds $17,475,000 $16,462,800 $33,937,800 100%
Note: Low and moderate housing prices were averaged for simplicity
Revenue & Project Value
Gross Sales Proceeds $33,397,800
Sales Marketing Cost $4,751,292
Net Project Value $29,186,508
Cost Analysis $ % of TDC
Construction Costs $12,620,000 51.07%
Parking Costs $0 0%
Residential Impact Fees $1,230,000 4.98%
Affordable Housing Fee $0 0%
Condo "Wrap" Insurance $0 0%
Soft Costs $1,234,236 5%
Other development costs $1,750,000 7.08%
SubTotal Hard and Soft Costs $16,834,236 68.13%
Financing Costs
Cash Subsidy for Affordable Housing $0 0%
Construction Loan Amount $17,296,465 70%
Interest on Construction Loan $0 0%
Points on Construction Loan $0 0%
Land Costs $7,875,000 31.87%
Total Development Cost (TDC) $24,709,236
TDC Per Unit $602,664
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $4,477,272 18.12% 0%
Minimum Profit $2,965,108
Is Project Feasible? Yes
Value Capture Opportunity $1,512,164
Memorandum
To:
Nell Selander, Deputy Director
Economic & Community Development Department
City of South San Francisco
PO Box 711 |South San Francisco, CA 94083-0711
From:
Joshua Abrams
Baird + Driskell Community Planning
2635 Benvenue Ave
Berkeley, CA 94704
Date: June 11, 2018
Subject: Fee reduction and prevailing wage
Summary:
Prevailing wages increase development costs by 20-25%, which would make all development types
studied infeasible without additional subsidy.
Providing a significant fee reduction to all units increases profitability, but the advantages of this
strategy should be weighed against the lost revenue for the city. Fee reductions just for the affordable
units does not provide much incentive, because only 10-20% of the units are affordable. Still, some
cities do choose to reduce the fees for just the affordable units as a way to show good will to
developers.
Analysis:
In their analysis, the consultants assumed developers would not use Prevailing Wages to reflect actual
conditions in South San Francisco. Prevailing Wages typically increase construction cost by 20-25%,
which would make all modeled developments infeasible, without outside subsidy. For example, in the
150 unit multifamily rental development, without affordable housing requirements, (hard) construction
costs increase from $290 per square foot to $348 per square foot (assuming a 20% increase in costs).
This reduces profit from 19.6% to 2.5%, which makes the project infeasible. The results are similar for all
developments modeled.
South San Francisco has relatively high fees for development. In some cases, significantly reducing the
fees would allow for higher affordable housing requirements, but this should be weighed against the
loss of revenue for the city.
In the multifamily development, the consultants assumed fees of $30,000 per unit. Significantly reducing
these fees would help make development more feasible (and therefor allow development to proceed
with higher affordable housing requirements). For context, the modeled multifamily units averaged
$418,000 to build, so a $5,000 drop in fees would reduce the cost by a little over one percent. While this
may not sound significant, it does make an important difference.
The table below summarizes reduction in fees and profits. It is important to note the reduction was
applied to all units, not just affordable units. If the fees are reduced for just affordable units (1/10 of all
units), the effects on profits are much smaller (1/10 of the effect).
Figure 1. Effects of reducing fees on all units
Fee level per unit today’s conditions Profit*
$30,000 19.6%
$25,000 21.0%
$20,000 22.5%
Fee level, 10% affordable at a mix of 60 and 80%
AMI, 20% density bonus
$30,000 17.6%
$25,000 19.0 %
$20,000 20.5%
* Target profit of 18-20%
The effects of fee reductions on the condominiums is less pronounced because they cost more to build
per unit (due to larger units and higher end interiors). For the base model studied with affordable units,
a $5,000 fee reduction in fees increases profit by approximately 0.8%. However, even reducing fees to
$0 for all units does not make a 20% affordable housing requirement feasible.
Fee reductions are a potential incentive for townhome developments. However, this development is
currently feasible in South San Francisco with a density bonus. The total development cost for
townhomes is slightly over $670,000 per unit, meaning a $5,000 or $10,000 fee reduction could reduce
costs by approximately 1%. Developers have lower profit targets for condominiums, so small changes in
profit associated with decreasing fees would have a relatively larger effect. In the modeled
development, reducing the impact fees by $10,000 per unit (at a total cost of $410,000 for the city)
would approximately offset the cost to the developer of providing one more affordable unit
(Assumptions: Profits varied by 0.1% when comparing 1) the prototype with 35 base units, 7 of which
are affordable and 6 density bonus units to 2) the same assumptions with a $10,000 fee reduction on all
units and 8 affordable units.)
Multifamily Rental Current Conditions
Project Summary Studio 1br 2br 3br 4br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200 0
Base Market-Rate Units 15 75 53 7 0 150 100% 110,850
Total Market-Rate Units 15 75 53 7 0 150 100% 110,850
Total Project Units 15 75 53 7 0 150 100% 110,850
Project Size acres sq. feet
Unloaded Area 110,850
Common Area 27,713
Total Built Area 138,563
Site Area 1 54,450
Floor Area Ratio 2.54
Dwelling Units/Acre 120.00
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,810 $2,601 $3,400 $3,980 $4,697 $430,285 100%
Bonus Unit Total $1,810 $2,601 $3,400 $3,980 $4,697 $0 0%
Affordable Level A $1,614 $1,845 $2,075 $2,306 $2,490 $0 0%
Affordable Level B $1,211 $1,384 $1,557 $1,730 $1,868 $0 0%
Affordable Level C $1,009 $1,153 $1,297 $1,441 $1,557 $0 0%
Gross Potential Income / mo $27,150 $195,075 $180,200 $27,860 $0 $430,285 100%
Rental Income & Project Value
Gross Potential Income (annual) $5,163,420
Less Vacancy $258,171
Gross Rental Income $4,905,249
Less Operating Costs $1,716,837
Net Operating Income (NOI) $3,188,412
Cap Rate 4.25%
Gross Value $75,021,455
Net Project Value $75,021,455
Cost Analysis $ % of TDC
Construction Costs $40,183,125 64.05%
Residential Impact Fees $4,500,000 7.17%
Soft Costs $12,054,938 19.21%
SubTotal Hard and Soft Costs $56,738,063 90.44%
Financing Costs
Construction Loan Amount $43,916,644 70%
Land Costs $6,000,000 9.56%
Total Development Cost (TDC) $62,738,063
TDC Per Unit $418,254
Parking % #
Base Parking Ratio 125% 188
Parking Reduction Incentive 0% 0
Net Parking Ratio 125.33% 188
Multifamily Rental, 10% Affordable (60 and 80% AMI)
/ 20% Density Bonus / No Fee Reduction
Project Summary Studio 1br 2br 3br 4br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200 0
Base Market-Rate Units 13 68 47 7 0 135 75% 100,100
Bonus Units 3 15 11 1 0 30 16.67% 22,050
Total Market-Rate Units 16 83 58 8 0 165 91.67% 122,150
Affordable Units: Level A 1 4 2 0 0 7 3.89% 4,800
Affordable Units: Level B 1 4 3 0 0 8 4.44% 5,700
Total Affordable Units 2 8 5 0 0 15 8.33% 10,500
Total Project Units 18 91 63 8 0 180 100% 132,650
Project Size acres sq. feet
Unloaded Area 132,650
Common Area 33,163
Total Built Area 165,813
Site Area 1 54,450
Floor Area Ratio 3.05
Dwelling Units/Acre 144.00
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,810 $2,601 $3,400 $3,980 $4,697 $388,058 77.85%
Bonus Unit Total $1,810 $2,601 $3,400 $3,980 $4,697 $85,825 17.22%
Affordable Level A $1,614 $1,845 $2,075 $2,306 $2,490 $13,144 2.64%
Affordable Level B $1,211 $1,384 $1,557 $1,730 $1,868 $11,415 2.29%
Affordable Level C $1,009 $1,153 $1,297 $1,441 $1,557 $0 0%
Gross Potential Income / mo $31,785 $228,797 $206,020 $31,840 $0 $498,442 100%
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $12,993,499 17.58% 5%
Minimum Profit $13,304,036
Is Project Feasible? No
Value Capture Opportunity $-310,537
Parking % #
Base Parking Ratio 125% 225
Parking Reduction Incentive 0% 0
Net Parking Ratio 125% 225
Rental Income & Project Value
Gross Potential Income (annual) $5,981,303
Less Vacancy $299,065
Gross Rental Income $5,682,238
Less Operating Costs $1,988,783
Net Operating Income (NOI) $3,693,454
Cap Rate 4.25%
Gross Value $86,904,811
Net Project Value $86,904,811
Cost Analysis $ % of TDC
Construction Costs $48,085,625 65.06%
Residential Impact Fees $5,400,000 7.31%
Soft Costs $14,425,688 19.52%
SubTotal Hard and Soft Costs $67,911,313 91.88%
Financing Costs
Construction Loan Amount $51,737,919 70%
Land Costs $6,000,000 8.12%
Total Development Cost (TDC) $73,911,313
TDC Per Unit $410,618
Multifamily Rental/10% Affordable (60 and 80% AMI) /
20% Density Bonus / $5,000 Fee Reduction on all Units
Project Summary Studio 1br 2br 3br 4br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200 0
Base Market-Rate Units 13 68 47 7 0 135 75% 100,100
Bonus Units 3 15 11 1 0 30 16.67% 22,050
Total Market-Rate Units 16 83 58 8 0 165 91.67% 122,150
Affordable Units: Level A 1 4 2 0 0 7 3.89% 4,800
Affordable Units: Level B 1 4 3 0 0 8 4.44% 5,700
Total Affordable Units 2 8 5 0 0 15 8.33% 10,500
Total Project Units 18 91 63 8 0 180 100% 132,650
Project Size acres sq. feet
Unloaded Area 132,650
Common Area 33,163
Total Built Area 165,813
Site Area 1 54,450
Floor Area Ratio 3.05
Dwelling Units/Acre 144.00
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,810 $2,601 $3,400 $3,980 $4,697 $388,058 77.85%
Bonus Unit Total $1,810 $2,601 $3,400 $3,980 $4,697 $85,825 17.22%
Affordable Level A $1,614 $1,845 $2,075 $2,306 $2,490 $13,144 2.64%
Affordable Level B $1,211 $1,384 $1,557 $1,730 $1,868 $11,415 2.29%
Affordable Level C $1,009 $1,153 $1,297 $1,441 $1,557 $0 0%
Gross Potential Income / mo $31,785 $228,797 $206,020 $31,840 $0 $498,442 100%
Rental Income & Project Value
Gross Potential Income (annual) $5,981,303
Less Vacancy $299,065
Gross Rental Income $5,682,238
Less Operating Costs $1,988,783
Net Operating Income (NOI) $3,693,454
Cap Rate 4.25%
Gross Value $86,904,811
Net Project Value $86,904,811
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $13,893,499 19.03% 5.06%
Minimum Profit $13,142,036
Is Project Feasible? Yes
Value Capture Opportunity $751,463
Parking % #
Base Parking Ratio 125% 225
Parking Reduction Incentive 0% 0
Net Parking Ratio 125% 225
Cost Analysis $ % of TDC
Construction Costs $48,085,625 65.86%
Residential Impact Fees $4,500,000 6.16%
Soft Costs $14,425,688 19.76%
SubTotal Hard and Soft Costs $67,011,313 91.78%
Financing Costs
Construction Loan Amount $51,107,919 70%
Land Costs $6,000,000 8.22%
Total Development Cost (TDC) $73,011,313
TDC Per Unit $405,618
Multifamily Rental/ 10% Affordable (60 and 80% AMI)
20% Density Bonus / $5,000 Fee Reduction on Affordable Only
Project Summary Studio 1br 2br 3br 4br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200 0
Base Market-Rate Units 13 68 47 7 0 135 75% 100,100
Bonus Units 3 15 11 1 0 30 16.67% 22,050
Total Market-Rate Units 16 83 58 8 0 165 91.67% 122,150
Affordable Units: Level A 1 4 2 0 0 7 3.89% 4,800
Affordable Units: Level B 1 4 3 0 0 8 4.44% 5,700
Total Affordable Units 2 8 5 0 0 15 8.33% 10,500
Total Project Units 18 91 63 8 0 180 100% 132,650
Project Size acres sq. feet
Unloaded Area 132,650
Common Area 33,163
Total Built Area 165,813
Site Area 1 54,450
Floor Area Ratio 3.05
Dwelling Units/Acre 144.00
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,810 $2,601 $3,400 $3,980 $4,697 $388,058 77.85%
Bonus Unit Total $1,810 $2,601 $3,400 $3,980 $4,697 $85,825 17.22%
Affordable Level A $1,614 $1,845 $2,075 $2,306 $2,490 $13,144 2.64%
Affordable Level B $1,211 $1,384 $1,557 $1,730 $1,868 $11,415 2.29%
Affordable Level C $1,009 $1,153 $1,297 $1,441 $1,557 $0 0%
Gross Potential Income / mo $31,785 $228,797 $206,020 $31,840 $0 $498,442 100%
Rental Income & Project Value
Gross Potential Income (annual) $5,981,303
Less Vacancy $299,065
Gross Rental Income $5,682,238
Less Operating Costs $1,988,783
Net Operating Income (NOI) $3,693,454
Cap Rate 4.25%
Gross Value $86,904,811
Net Project Value $86,904,811
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $13,083,499 17.72% 5%
Minimum Profit $13,287,836
Is Project Feasible? No
Value Capture Opportunity $-204,337
Parking % #
Base Parking Ratio 125% 225
Parking Reduction Incentive 0% 0
Net Parking Ratio 125% 225
Cost Analysis $ % of TDC
Construction Costs $48,085,625 65.14%
Residential Impact Fees $5,310,000 7.19%
Soft Costs $14,425,688 19.54%
SubTotal Hard and Soft Costs $67,821,313 91.87%
Financing Costs
Construction Loan Amount $51,674,919 70%
Land Costs $6,000,000 8.13%
Total Development Cost (TDC) $73,821,313
TDC Per Unit $410,118
Multifamily Rental/Prevailing Wage/No Affordable Units
Project Summary Studio 1br 2br 3br 4br Total % Area (sq. feet)
Approximate Unit Size 400 650 900 1,200 0
Base Market-Rate Units 15 75 53 7 0 150 100% 110,850
Total Market-Rate Units 15 75 53 7 0 150 100% 110,850
Total Affordable Units 0 0 0 0 0 0 0% 0
Total Project Units 15 75 53 7 0 150 100% 110,850
Project Size acres sq. feet
Unloaded Area 110,850
Common Area 27,713
Total Built Area 138,563
Site Area 1 54,450
Floor Area Ratio 2.54
Dwelling Units/Acre 120.00
Rent Schedule Studio 1br 2br 3br 4br Total %
Market-Rate Units $1,810 $2,601 $3,400 $3,980 $4,697 $430,285 100%
Gross Potential Income / mo $27,150 $195,075 $180,200 $27,860 $0 $430,285 100%
Rental Income & Project Value
Gross Potential Income (annual) $5,163,420
Less Vacancy $258,171
Gross Rental Income $4,905,249
Less Operating Costs $1,716,837
Net Operating Income (NOI) $3,188,412
Cap Rate 4.25%
Gross Value $75,021,455
Net Project Value $75,021,455
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $1,835,780 2.51% 4.36%
Minimum Profit $13,173,422
Is Project Feasible? No
Value Capture Opportunity $-11,337,641
Parking % #
Base Parking Ratio 125% 188
Parking Reduction Incentive 0% 0
Net Parking Ratio 125.33% 188
Cost Analysis $ % of TDC
Construction Costs $48,219,750 65.89%
Residential Impact Fees $4,500,000 6.15%
Soft Costs $14,465,925 19.77%
SubTotal Hard and Soft Costs $67,185,675 91.8%
Financing Costs
Construction Loan Amount $51,229,973 70%
Land Costs $6,000,000 8.2%
Total Development Cost (TDC) $73,185,675
TDC Per Unit $487,905
Condominiums / 20% Affordable /
Density Bonus / Full Fee Reduction on All Units
Project Summary 2br 3br Total % Area (sq. feet)
Approximate Unit Size 1,080 1,250
Total Market-Rate Units 48 47 95 83% 110,590
Total Affordable Units* 9 11 20 17% 22,650
Total Project Units 57 58 115 100% 133,240
*Affordable 2 bedroom is 1,050 sq. feet and 3 bedroom is 1,200 sq. feet
Project Size acres sq. feet
Unloaded Area 133,240
Common Area 33,310
Total Built Area 166,550
Site Area 1 43,560
Floor Area Ratio 3.82
Dwelling Units/Acre 115.00
Price Schedule 2br 3br Total %
Market-Rate Units $864,000 $1,000,000 $88,472,000 93%
Affordable $314,000 $355,000 $6,731,000 7%
Gross Potential Income / mo $44,298,000 $50,905,000 $95,203,000 100%
Revenue & Project Value
Gross Sales Proceeds $95,203,000
Sales Marketing Cost $4,760,150
Net Project Value $90,442,850
Cost Analysis $ % of TDC
Construction Costs $63,455,550 75.58%
Soft Costs $16,498,443 19.65%
SubTotal Hard and Soft Costs $79,953,993 95.24%
Financing Costs
Construction Loan Amount $58,767,795 70%
Land Costs $4,000,000 4.76%
Total Development Cost (TDC) $83,953,993
TDC Per Unit $730,035
Profitability $ Profit as % of TDC Yield on Cost
Estimated Profit $6,488,857 7.73% 0%
Minimum Profit $12,593,099
Is Project Feasible? No
Value Capture Opportunity $-6,104,242
Parking % #
Base Parking Ratio 125% 144
Parking Reduction Incentive 0% 0
Net Parking Ratio 125.22% 144
Development Fees
The City requires impact and other fees depending on the size and type of development. Following
is a summary of fees, as of January 1, 2018. Fees are subject to annual adjustment, per City Council
review and resolution. This information is intended to provide an overview of fees that may be
applicable to development projects.
Parks and Recreation Impact Fee
See SSFMC Section 8.67 for more information. Each
application will be assessed a $700 Administrative
Fee.
Residential Uses Cost / Unit
Single-Family Home $29,124
2-4 Units $25,157
5-19 Units $21,358
20-49 Units $17,221
50+ Units $15,026
Mobile Home $22,371
Non-Residential Uses Cost / Square Foot
Commercial / Retail $3.58
Hotel / Visitor $3.17
Office / R&D $2.77
Industrial $1.95
Childcare Fee
See SSFMC Section 20.310 for more information.
Residential Uses Cost / Unit
Up to 8 du/ac $1,979
8.1-18 du/ac $1,858
18 + du/ac $1,851
Other residential $1.28/SF
Non-Residential Uses Cost / Square Foot
Commercial / Retail $.68
Hotel / Visitor $.18
Office / R&D $.57
Industrial $.54
Bicycle and Pedestrian Impact Fee
See SSFMC Section 8.68 for more information.
Residential Uses Cost / Unit
Single-Family Home $243
Multifamily $170
Mobile Home $127
Non-Residential Uses Cost / Square Foot
Commercial / Retail $.36
Hotel / Visitor $.24 / visitor SF
Office / R&D $.09
Industrial $.12
School District Fee
The City requires proof of payment of this fee to
SSFUSD prior to permit issuance.
Cost / Square Foot
Residential $3.48
Commercial/Industrial $.56
Public Safety (Police & Fire) Impact Fee
See Resolution 97-2012 for more information.
Residential Uses Cost / Unit
Up to 8 du/ac $1,285
8.1-18 du/ac $810
18 du/ac + $563
Non-Residential Uses Cost / Square Foot
Commercial / Retail $.44
Hotel / Visitor $.42
Office / R&D $.44
Industrial $.18
East of 101 Impact Fees
These fees require specialized calculations per
project. Contact the Engineering Division for
information on calculating East of 101 Impact fees:
(650) 829-6652
Oyster Point Interchange Impact Fee
Sewer Capacity Fee
This fee requires specialized calculations per project.
Contact the Water Quality Control Plant for
information on calculating the Sewer Capacity Fee:
(650) 877-8555
East of 101 Traffic Impact Fee
East of 101 Sewer Impact Fee
City of South San Francisco
315 Maple Avenue, South San Francisco, CA
94080
Phone: (650) 877-8535 Email:
[email protected]
Website: www.ssf.net/planning
PAGE 1
CITY OF SOUTH SAN FRANCISCO
TO: City of South San Francisco
FROM: Century Urban, LLC
SUBJECT: Inclusionary Housing Research
DATE: May 31, 2018
During the City of South San Francisco’s (the “City”) Housing Subcommittee meeting on May 7,
2018, Housing Subcommittee members posed several questions to City staff and their consultant
team regarding housing policy and development. These questions addressed items including
live-work housing, prevailing wage construction costs, and recent sale prices at a townhome
project developed in the City by City Ventures. This memorandum provides a short summary of
Century Urban, LLC’s (“Century | Urban”) findings based on its research regarding live-work
housing, prevailing wage construction costs, and townhome sale prices at City Venture’s project.
Live-Work Housing
Century | Urban was asked to research the feasibility of utilizing live-work housing as a means
of creating affordable housing. Historically, live-work housing has not been a successful means
for creating affordable housing on any scale. In fact, live-work zoning designations have had a
number of unexpected consequences, requiring cities to bar live-work developments.
San Francisco provides an instructive example; the city’s experience with live-work housing
around 20 years ago is notable and has been thoroughly studied by housing experts.1 In 1988, San
Francisco created a live-work ordinance with the intention of providing affordable housing for
artists and artisans. To incentivize the creation of these units, the city eased restrictions on density,
parking, lot coverage, and exempted live-work units from certain development fees. To some
extent, the legislation was seen as ratifying what were already common illegal non-residential
uses of residential housing by artists and artisans, but the overall goal of the policy was the
creation of affordable housing.
Unfortunately, when the late 1990s tech boom created an increasing demand for housing in San
Francisco, live-work unit development was co-opted by developers as a way to create residential
housing more easily and cheaply, and as a means to convert industrial and other building types
to more valuable residential housing that otherwise would not be permitted. As the housing
market heated up, development of live-work units surged over ten times the level of its initial
1 Study of San Francisco:
Priced High on a Hill: A Study of Housing Affordability in San Francisco, Larry A. Rosenthal, Michael Donovan, Greg Wagner,
University of California – Berkeley, November 2003,
https://www.nar.realtor/ncrer.nsf/files/fullreportrosenthal.pdf/$FILE/fullreportrosenthal.pdf,
https://www.livablecity.org/keeping-arts-and-artists-in-san-francisco/, https://sfbos.org/industrial-protection-zones-livework-
projects-and-community-plans
PAGE 2
creation to over 2,000 live-work units delivered in 1999. The city realized that besides creating
housing in neighborhoods intended for other uses, live-work housing was using up precious
industrial space, while most of those living in the live-work units continued to work outside their
homes.
In addition, despite significant regulation requiring both tenant and landlord compliance to
ensure the units went to artists or artisans, live-work units ended up being rented or sold to highly
paid professionals or to tech start-up entrepreneurs at prices that were unaffordable to artists and
artisans. By 2001, live work units commanded a price premium of 32% over other housing types.
In 2001, the San Francisco Board of Supervisors concluded that live work units were not
accomplishing the goal of creating affordable housing and prohibited further live-work
construction after 2002.
San Francisco’s experience with live-work housing is similar to that of many of jurisdictions. A
study of live-work’s successes and challenges completed for a borough of the City of London
concluded among other things that:
“Although ‘live/work’ is supported by some for simultaneously
meeting employment and housing policy objectives the study
found that the vast majority of proposals have performed poorly
against government policy objectives in these fields and that they
are not leading to sustainable mixed communities.”2
“As a result ‘live/work’ schemes are resulting in significant loss of
affordable housing, over 1,000 units [in the City of London] over
the last 5 years using the conservative figure of 25% of all
live/work scheme units of 10 or more units overall in the last 5
years.”3
This study concludes that the economic benefits of live-work to businesses are minimal, and, that
due to enforcement problems, the live-work designation is typically circumvented for unintended
uses and affordable housing is not created.
While it is not possible to state conclusively that live-work housing would not further affordable
housing objectives in the City, the experience of other jurisdictions suggests that such utilizing
live-work housing should be carefully studied before proceeding.
Prevailing Wage
Staff was asked how requiring prevailing wage would affect the cost of development in the City.
The answer to this question depends on the trades required for a given project and changes over
time based on the supply and demand of subcontractors and general construction costs. Based
on Century | Urban’s research, for Type V multi-family construction with one level of concrete
2 https://www.lbhf.gov.uk/sites/default/files/section_attachments/livework_final_lowres_tcm21-51146.pdf, page 6
3 Ibid
PAGE 3
podium, building a project with prevailing wage under current market conditions is estimated to
add a 20% to 25% cost premium over the cost of a non-prevailing wage project. Anecdotally,
research indicates that the longer-term variance between prevailing wage and non-prevailing
wage costs has been closer to 10%. However, given the extreme supply-demand imbalance in the
current market for subcontractors and general cost of living increases in the Bay Area, this
differential is currently substantially increased.
Prior analysis of inclusionary housing requirements on the feasibility of prototypical
development projects were based on non-prevailing wage costs. A prevailing wage requirement
would reduce the feasibility of such development projects assuming that inclusionary housing
requirements are held constant.
City Ventures Project Sales Prices
Staff was asked for any available data on the sale prices for townhomes sold at the City Ventures
project “South City Place” in the City, which was completed in 2017 and according to the project
website “Sold Out” as of May 2018. Century | Urban’s research resulted in the following sale
prices: 4
South City Place Sales
Date Address Price Bedrooms Bathrooms Square Feet $/Square Foot Monthly HOA
3/29/18 1269 Edgewood Way $954,314 3 2 1,496 $638 $279
3/22/18 1271 Edgewood Way $1,058,387 3 3 1,750 $605 $279
12/8/17 1270 Edmonson Way $1,051,000 3 3 1,792 $586 N/A
12/8/17 1266 Edmonson Way $1,009,035 N/A N/A N/A N/A N/A
City Ventures provided further information on additional sales. The sales numbers below are
slightly different than those above on the same units; this may be a reflection of optional upgrades
or incentive fees which are not included in the data above.
4 Sources: Redfin, MLS, Climb Real Estate, Berkshire Hathaway
PAGE 4
South City Place Sales - Provided by City Ventures
Date Sold COE Date or
estimated
COE
Address Final Sales
Price
Square Feet $/Square Foot BMR
Unit
Status
1/29/17 3/30/17 1270 Mission Road $950,877 1,750 $543 Closed
11/29/16 5/20/17 1268 Mission Road $392,993 1,496 $263 Yes Closed
7/25/16 3/30/17 1266 Mission Road $893,537 1,455 $614 Closed
12/30/16 3/30/17 1264 Mission Road $1,034,501 1,792 $577 Closed
7/1/16 5/30/17 1254 Mission Road $1,000,672 1,792 $558 Closed
12/1/16 7/20/17 1252 Mission Road $334,390 1,455 $230 Yes Closed
7/27/16 5/30/17 1250 Mission Road $947,690 1,500 $632 Closed
1/9/17 7/20/17 1248 Mission Road $449,616 1,455 $309 Yes Closed
11/3/16 5/30/17 1246 Mission Road $1,026,374 1,792 $573 Closed
11/21/16 10/26/17 1270 Edmonson Way $1,005,501 1,792 $561 Closed
10/3/17 10/30/17 1268 Edmonson Way $507,229 1,455 $349 Yes Closed
6/3/17 10/26/17 1266 Edmonson Way $1,009,035 1,712 $589 Closed
2/13/17 10/25/17 1264 Edmonson Way $884,990 1,455 $608 Closed
1/23/17 10/27/17 1262 Edmonson Way $930,801 1,500 $621 Closed
2/23/17 12/27/17 1260 Edmonson Way $930,294 1,455 $639 Closed
7/1/16 12/30/17 1258 Edmonson Way $1,029,441 1,792 $574 Closed
1/21/17 12/20/17 1254 Edmonson Way $1,067,273 1,792 $596 Closed
2/9/17 12/20/17 1252 Edmonson Way $920,301 1,455 $633 Closed
4/3/17 12/21/17 1250 Edmonson Way $993,386 1,500 $662 Closed
12/15/16 12/22/18 1248 Edmonson Way $276,778 1,455 $190 Yes Closed
12/22/17 12/29/18 1246 Edmonson Way $1,023,955 1,792 $571 Closed
5/2/17 3/26/18 1271 Edgewood Way $1,068,387 1,750 $611 Closed
6/6/17 3/27/18 1269 Edgewood Way $963,814 1,496 $644 Closed
5/8/17 3/27/18 1267 Edgewood Way $972,839 1,455 $669 Closed
4/3/17 3/23/18 1265 Edgewood Way $1,085,023 1,712 $634 Closed
1/1/17 3/27/18 1263 Edgewood Way $564,842 1,455 $388 Yes Closed
4/4/17 3/24/18 1261 Edgewood Way $1,074,965 1,792 $600 Closed
3/15/17 6/27/18 1253 Edgewood Way $1,081,808 1,792 $604 Under
Contract
12/15/16 6/27/18 1251 Edgewood Way $507,229 1,455 $349 Yes Under
Contract
2/7/17 6/29/18 1249 Edgewood Way $922,136 1,496 $616 Under
Contract
4/9/17 6/29/18 1247 Edgewood Way $1,083,988 1,750 $619 Under
Contract
The prices on South City Place are consistent with the estimated pricing used in the townhome
prototype analysis presented in the report to the Housing Subcommittee on May 7, 2018.
PAGE 5
Conclusion
The research above was conducted in response to questions raised during the City’s Housing
Subcommittee May 7, 2018 meeting. Century | Urban is available to research or answer any
follow-up questions.
Attachment 5
July 19, 2018 Planning Commission Meeting: Public
Hearing and Consideration of
Commercial Linkage Fee Ordinance
August 8, 2018 City Council Meeting: 1st Reading to
Introduce Commercial Linkage fee
Ordinance
August 22, 2018 City Council Meeting: 2nd Reading and
final adoption of ordinance
September 21, 2018 Ordinance Effective Date
COMMERCIAL LINKAGE FEE
PROPOSED TIMELINE
*Dates subject to change
Economic and Community Development
400 Grand Avenue
South San Francisco, CA 94080
Phone: 650‐829‐6620
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