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EPS Draft Memorandum
19 IN
DRAFT TECHNICAL MEMORANDUM
To: Sharon Wood, David Lepo and Brandon Nichols, City of Newport Beach
From: Darin Smith and Melina Raffin
Subject Inclusionary Housing In -Lieu Fee Study; EPS #17062
Date: October 11, 2007
Economic & Planning Systems, Inc. (EPS) was retained in 2004 by the City of Newport
Beach to conduct an analysis of the City's inclusionary housing program, with specific
focus on the calculation of an appropriate fee that housing developers may pay in lieu of
providing affordable units within their development projects. Since EPS's initial study,
the City has revised their inclusionary policy, thus requiring a revised analysis of the in-
lieu fee. This Technical Memorandum presents an update of the findings of EPS's
analysis and documents the methodology used to calculate the in -lieu fee.
STUDY OVERVIEW AND SUMMARY OF FINDINGS
The key findings of EPS's analysis are as follows:
1. Through the Housing Element of the General Plan, the City of Newport Beach
has an inclusionary housing program that requires residential developers to
either provide 15 percent of the total units in their projects as affordable housing
units, or pay a fee in lieu of providing those units. The City proposes to li mit the
inclusionary ordinance requirement to projects of at least 11 units.
2. The City's inclusionary housing policy does not require that the affordable units
be of the same type or quality as the market -rate units in any given project.
Thus, it is likely that some developers will elect to provide affordable units as
rental apartments, even if the market -rate units in their projects are for sale.
3. The City has indicated that developers should have the choice of providing units
for households of very low - income, low- income, or moderate income. Because
units for lower - income households require higher construction subsidies, the
percentage of units required varies by income category.
BERKELEY SACRAMENTO DENVER
2501 Ninth St., Suite 200 Phone: 510- 841 -9190 Phone: 916 -649 -8010 Phone: 303 - 623 -3557
Berkeley, CA 94710 -2515 Fax: 510- 841 -9208 Fax 916- 649 -2070 Fax: 303 -623 -9049
www.epsys.com
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Sharon Wood, David Lepo and Brandon Nichols October 11, 2007
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4. EPS has determined that the following percentages would have essentially
equivalent financial impacts on residential development projects (see Table 1):
10% Very low - income rental units, or
15% Low - income rental units, or
20% Moderate - income for -sale units
5. Using these equivalencies, the Inclusionary Housing In -Lieu fee has been
calculated at a maximum of $26,500 per market -rate unit.
REVIEW OF THE CITY'S INCLUSIONARY HOUSING POLICIES
CURRENT INCLUSIONARY POLICY
The 2000 -2008 Housing Element for the City of Newport Beach established a policy that
reads as follows:
Policy 2.2 Encourage the housing development industry to respond to
housing needs of the community and the demand for housing as
perceived by the industry, with the intent of achieving the
Regional Housing Needs Assessment construction goals within
five (5) years.
The program set forth to accomplish this policy is Housing Program 2.2.1, which states
that the City will:
"Require a proportion of affordable housing in new residential developments or
levy an in -lieu fee. The City's goal over the five -year planning period is for an
average of 15 percents of all new housing units to be affordable to very low—,
low -, and moderate - income households. The City shall either (a) require the
payment of an in -lieu fee, or (b) require the preparation of an Affordable
Housing Implementation Plan (AI-HP) that specifies how the development will
meet the City's affordable housing goal, depending on the following criteria for
project size:
1. Projects of 50 or fewer units shall have the option of preparing an
AMP or paying the in -lieu fee.
2. Projects where more than 50 units are proposed shall be required to
prepare an AI-11F."
1 In determining the number of whole affordable units required, the City proposes that any decimal fraction
less than 0.50 shall be rounded down to the nearest whole number, and any decimal fraction greater than or
equal to 0.50 shall be rounded up to the next whole number.
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Furthermore, this housing program allows the affordable units to be provided at an off -
site location approved by the City, and is silent and thus flexible about the types of
affordable units that must be provided. While some jurisdictions require that the
affordable units be of the same type, size, and /or quality as the market -rate units in a
given project, the Newport Beach policy allows the developer to provide their affordable
units in the most efficient product types possible. This allowance of flexibility is
important in calculating the in -lieu fee.
PREVIOUS IN -LIEU FEE STUDIES
The City commissioned a study in 1999 for the formal establishment of an in -lieu fee
program; however, that study did not result in a formalized in -lieu fee program. In
addition, EPS was retained by the City in 2005 to conduct an in -lieu fee analysis of the
City's then - current inclusionary housing policy, which required residential developers
to provide 20 percent of the total units in their projects as affordable housing units. That
study also did not result in a formalized in -lieu fee program, because the City has since
reduced the inclusionary requirement from 20 to 15 percent.
However, despite not having a formal in -lieu fee program to date, the City has
negotiated in -lieu fees with several developers in recent years. Examples of in -lieu fee
received from past projects include the following:
Development Project
Market -Rate Units
Fee per Unit
Total Fees
Ford
404
$5,000
$2,020,000
Sailhouse
90
$6,000
$540,000
Cann Lofts
q2002
22
$6,359
$139,898
15th St. Townhomes
42
$8,000
$336,000
Total or Avera e2
558
$5,441
$3,035,898
The City committed $1.8 million of the in -lieu fee reserve to the Bayview Landing senior
affordable housing project. For future in -lieu fee expenditures, the City's Affordable
Housing Task Force has created a program that identifies preferred options for the use
of the funds.
AFFORDABLE HOUSING SUBSIDY CALCULATION
METHODOLOGY
The calculation of an appropriate fee in lieu of the development of inclusionary housing
units requires the estimation of the subsidy required to develop an affordable unit. For
this subsidy calculation, the value of the affordable unit (as calculated through sale
values or capitalized rental operating income streams) is compared to the costs to
2 This amount may not represent the complete amount that has been received by the City to date.
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develop the unit including "direct" costs (labor and materials), "indirect" costs (design,
permits, financing, etc.), and land acquisition costs.
KEY ASSUMPTIONS
EPS sent the preliminary development cost, revenue, and valuation assumptions to
numerous developers of market -rate and affordable housing in Orange County and
Southern California (see Appendix A), and conducted telephone interviews with
representatives of several companies. EPS made several adjustments to the original
assumptions based on these groups' input. Based on information and direction received
from City staff, market -rate and affordable housing developers, and EPS research EPS
has determined that the following assumptions shall be used to calculate the affordable
housing subsidy.
Type of Unit
To accurately reflect market conditions and calculate required development subsidies, it
is important to ensure that the rent assumptions for affordable units are in fact below
market rates. Staff from the City of Newport Beach conducted a survey of 13 market -
rate apartment complexes in July 2007, and found that no units were affordable to very
low - income households and very few were affordable to low- income households, but
most were affordable to moderate - income households (see Appendix B). For this reason
(and another discussed in the "In -Lieu Fee Calculation" section below), EPS has
assumed that moderate - income households would occupy for -sale units.
All very low- and low - income affordable housing units developed with subsidy from
the in -lieu fee are assumed to be multifamily rental units, while moderate - income units
are assumed to be multifamily condominiums. These assumptions are consistent with
the letter of the Housing Element which does not require that inclusionary affordable
units built by the developer be the same type of unit as the market -rate units.
EPS has further assumed that the inclusionary units would be mixed by number of
bedrooms, with 40 percent of all units as one - bedroom units (for two- person
households), 40 percent of all units as two- bedroom units (for four - person households),
and 20 percent of all units as three- bedroom units (for six - person households) .3 While
any given development project may have a different mix to serve specific market niches
(e.g., families, singles, seniors, etc.), the unit distribution described above is a
simplifying assumption that is similar to the distribution of rental units within the City
as found in the 2000 Census.
For purposes of cost estimation, one - bedroom units are assumed to be 725 square feet,
while two- bedroom units are 1,050 square feet and three- bedroom units are 1,250 square
feet. These unit sizes are generally in the lower half of the size ranges discovered in a
survey of Newport Beach apartment complexes, which showed one - bedroom units
3 The City's Housing Element establishes that the maximum household income for a given affordable unit
shall assume two people per bedroom, except for efficiency units (one person).
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ranging from 626 to 1,152 square feet, two- bedroom units from 926 to 1,546 square feet,
and three- bedroom units from 1,160 to 1,700 square feet.
The unit sizes and the distribution of units by number of bedrooms are assumed to be
the same regardless of the income level being served.
Development Value
The value of each unit is determined either by its sale price (for homeownership units)
or the capitalized value of its net operating income stream (for rental units).
Rental Development Value
Monthly Rent
The Housing Element states that for each income category, monthly rent is assumed to
equal 30 percent of gross monthly household income. Moreover, EPS has assumed that
inclusionary units within each category will be affordable at the maximum income
within that category. For instance, a "low- income" household may have an income
anywhere from 51 percent to 80 percent of Orange County's Median Family Income
(MFI). EPS has assumed that the maximum monthly rent in this income category will be
based on 80 percent of MFI, rather than 51 percent or some other middle figure (such as
65 percent). This assumption has the result of minimizing the housing production
subsidy; however, the language of the Housing Element appears to allow for this
possibility for those developers who would produce inclusionary units, so the same
allowance is made for those who would pay the in -lieu fee. Table 2 shows the income
levels and associated allowable monthly rents for rental units of different sizes.
It is also necessary to assume a certain amount of vacancy for calculating the effective
gross income stream from a rental project. EPS has assumed at stabilized operations an
affordable multifamily apartment complex in Newport Beach would have 5 percent
annual vacancy.
Operating Expenses
Annual operating expenses for rental apartments are assumed at $4,200 per one-
bedroom unit, $4,500 per two - bedroom unit, and $4,800 per three - bedroom unit,
regardless of income level. These operating expenses cover property management,
common utilities, marketing, maintenance, taxes, and similar expenses.
Capitalization Rate
A rental unit's net operating income (effective gross income less expenses) is converted
to a unit value through use of a capitalization rate. The capitalization rate reflects an
investor's perceived risk as well as the investor's opportunity cost. For a multifamily
rental project in the City of Newport Beach, the capitalization rate is assumed to be 7.0
percent. This rate may be slightly higher than what might be achieved under present
market conditions, but reflects a somewhat longer term rate that should be robust
through market fluctuations. The calculations for apartment development values are
shown on Table 3.
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For -Sale Development Value
City policy dictates that the price of a for -sale affordable home cannot exceed three times
the annual income of the occupying household. The Year 2007 income limits established
by the U.S. Department of Housing and Urban Development for Orange County are
shown on Table 4, as are the maximum allowable home prices. It is worth noting that
not all jurisdictions limit the affordable home prices to three times the annual income,
and that Newport Beach's policy results in lower prices than might be allowed in other
jurisdictions for similarly sized households.
However, this effect is offset somewhat by Newport Beach's allowance of two persons
per bedroom. Many jurisdictions base income levels on households of sizes equal to the
number of bedrooms plus one (e.g., three- person household in a two - bedroom unit,
four - person household in a three - bedroom unit), but Newport Beach allows four people
in a two- bedroom unit and six in a three bedroom unit. The corresponding income
limits are higher for larger households; thus, the affordable price allowed for a three -
bedroom unit is higher for a six - person household than it would be for a four - person
household.
Development Costs
The cost of development must be compared to the development value to determine if
there is a need for financial subsidy. EPS has made a variety of cost assumptions, as
detailed below. One overarching assumption is that development costs are the same
regardless of the income level being served. The calculations for development costs are
shown on Tables 5 and 6 for apartments and condominiums, respectively.
Direct Construction Costs
Direct construction costs include the costs for labor and materials for the buildings and
standard site improvement (surface parking, landscaping, etc.) as well as contractor fees.
EPS has assumed that direct construction costs would equal $140 per gross square foot
of each apartment building, and $150 per square foot for condominiums because of the
higher level of finish typical of for -sale development. These figures account for slight
cost variations among unit sizes.
Indirect Costs
Indirect costs include architecture and engineering costs, financing costs, permits and
fees, and other development expenses beyond those required for actual labor and
materials. For both apartments and condominiums, EPS has assumed that indirect costs
will equal 35 percent of direct construction costs.
Land Costs
Development costs must account for the price of the land underlying the apartment
building. EPS has assumed that land entitled for multifamily housing in Newport Beach
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would cost $3,250,000 per acre.4 EPS has further assumed that both apartments and
condominiums would be built at 20 dwelling units per acre, resulting in a land cost of
$162,500 per unit.
Developer Profi t
As is standard for rental apartment development, developer profit is accounted for in
the development value calculations through the capitalization rate and is thus not
included as a separate line item for development costs. For condominiums, however,
developers must realize their profit at the time of sale, as there is no ongoing revenue
stream. EPS has assumed a 10 percent profit margin for developers of for -sale units
affordable to moderate - income households.
CALCULATIONS
Detailed calculations of development values and costs for each unit size and income
level are shown on Tables 7 and 8, for apartments and condominiums, respectively.
The indusionary housing development subsidy is calculated by subtracting the
development costs from the development value. If the result is negative, a subsidy is
required in the amount shown. Those tables also show the "weighted average" subsidy
by income level, assuming the units are distributed among one -, two -, and three -
bedroom units as discussed above.
As shown on Table 7, rental units for very low- and low -income households require
subsidy regardless of the unit size, as the costs of development exceed the value of the
units.
Table 8 shows that affordable condominium units require greater subsidy than
apartment units. This result is because the construction costs are slightly higher, the
developer profit adds an additional cost, and the City's policy -based method for
calculating allowable unit prices for for -sale housing (three times household income)
yields lower unit values for condos than does the method for rental prices (30 percent of
income on rent).
4 This $3,250,000 per acre land value was derived from EPS's conversations with market -rate and affordable
housing developers.
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IN -LIEU FEE CALCULATION
METHODOLOGY
To calculate the in -lieu fee, the total cost that would have been incurred by the
developer to produce the affordable units is divided by the number of units produced.
For instance, a developer of a 20 -unit project would be required to build three
inclusionary units to achieve the City's overall goal of "an average of 15 percent of all
new residential development ... affordable to very low- low -, and moderate - income
households." if each inclusionary unit required a subsidy of $100,000, the developer
who builds the units would have borne a total subsidy of $300,000. If the developer opts
to pay the in -lieu fee instead of producing the units, and thus produces 20 market -rate
units, the total subsidy of $300,000 would be divided by 20 market -rate units to result in
an in -lieu fee requirement of $15,000 per market -rate unit. The actual assumptions and
calculations are discussed below.
CALCULATIONS
The primary assumption required to calculate the in -lieu fee is the proportionate income
distribution of the households to be served by affordable housing units. Whereas some
jurisdictions require that inclusionary units be provided to a mix of income- levels within
the same project, the City of Newport Beach has suggested that developers should be
given the option of providing affordable units for very low -, low -, or moderate - income
households. As such, it is imperative that an economic equivalency be established
among these income levels, so that developers will not simply provide 15 percent of
units for moderate - income households (that require the least subsidy) and do not
produce any housing affordable to low- or very low- income households.
The City has detemuned that the basis for the economic equivalency shall be an
inclusionary requirement that 15 percent of new units be affordable to low - income
households. As shown on Table 7, the subsidy required to produce an apartment unit
affordable to low- income households is roughly $171,000. Thus, a 100 -unit development
providing 15 apartments affordable to low- income households would bear an implied
subsidy of $2,560,000. If no such affordable units are produced and the developer builds
100 market -rate units, the cost of the implied subsidy spread over 100 units would be
$25,600 per market -rate unit.
Because the subsidies per unit are greater for very low - income units, fewer very low -
income units would generate the same overall economic impact to the development
project. Similarly, moderate - income units require less subsidy, so more moderate -
income units are required to generate the equivalent economic impact. On Table 9, EPS
has calculated the economic equivalencies, which are summarized as follows:
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Sharon Wood, David Lepo and Brandon Nichols October 11, 2007
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Income Level
Average Subsidy
per Unit
Percent of Units
In -Lieu Fee per
Market -Rate Unit
Very Low rental
$272,000
10%
$27,200
Low rental
$171,000
15%
$25,650
Moderate for -sale
$133,000
20%
$26,600
Averse
$177,000
15%
$26,500
Using this methodology, the in -lieu fee to be paid by developers choosing not to
construct affordable units within their projects would be $26,500 per market -rate unit.
Please note that EPS has evaluated the equivalency if a developer chose to provide
moderate income rental units. As discussed earlier, many market -rate apartments in
Newport Beach are actually affordable to moderate income households. hi addition,
because of the method required by the City to calculate the maximum affordable for -sale
price (three times gross household income), the maximum price of a moderate income
for -sale unit is actually lower than the capitalized value of a moderate income rental unit
(compare those values on Tables 3 and 4) while the development costs are higher for
condominiums than for rental apartments (see Tables 5 and 6). Thus, the subsidy
required for moderate income rentals is lower than the subsidy for moderate income for -
sale units ($36,000 versus $133,000). To provide the equivalent subsidy of a project
providing 15 percent low income units, a developer would have to provide about 75
percent of total units in a project as rentals affordable to moderate income households.
ADDITIONAL CONSIDERATIONS
SETTING THE FEE AMOUNT
This study calculates the maximum fee that can be charged to developers for whom the
City approves fees instead of the provision of inclusionary units. The City does have
legal leeway to set the fee at any level up to the maximum allowable fee.
FEE ESCALATION
The Inclusionary Housing In -Lieu Fees calculated herein reflect current income levels,
allowable rent rates, unit values, and development costs. Each of these items is likely to
change over time. In the past, the City of Newport Beach has adjusted its negotiated in-
lieu fees according to an annual inflation measure, such as the Consumer Price Index.
Other jurisdictions use similar measures, such as the Construction Cost Index or the rate
of increase in the Median Family Income. Such a measure avoids the need to re-
calculate the fee over time. However, the City may wish to consider a regular re-
calculation of the fee every few years to ensure that the fee continues to capture the full
subsidy required to produce affordable housing units in the City of Newport Beach. In
either case, the method and frequency of re- calculation should be written into the
Inclusionary Housing In -Lieu Fee ordinance.
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Sharon Wood, David Lepo and Brandon Nichols October 11, 2007
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PARTIAL SATISFACTION OF THE INCLUSIONARY REQUIREMENT
Through City approval of the AI-HP, some developers may propose to provide some
portion of the required inclusionary units within their own project, while paying the In-
Lieu Fee for the remainder of their required units. In such instances, the City should
determine the total amount of the subsidy required for the project and charge the
difference between the subsidies associated with the units provided in the project and
those that will be required offsite. Thus, a 100 -unit development providing 10
apartments affordable to low - income households would need to provide five additional
low- income affordable units off -site, or a total subsidy of $854,000 ($171,000 per
affordable unit not built).
APPLICATION OF CALCULATIONS IN THE COASTAL ZONE
Consistent with State law, Section 20.86 of the City's planning and zoning code ( "Low
and Moderate Income Housing within the Coastal Zone ") states, "When demolition or
conversion activities involve low- and moderate - income units, replacement units shall
be provided on a one for one basis." This requirement is intended to be met through the
actual provision of units, preferably on -site, but under certain circumstances, the
developer can pay a fee in lieu of providing the affordable units.
The per -unit subsidies calculated on Tables 7 and 8 of this document can be used to
determine the in-lieu fees required of developers whose projects result in a loss of units
in the Coastal Zone occupied by lower - income households. For example, if a proposed
Coastal Zone project would result in one fewer two- bedroom rental unit occupied by a
low- income household, the developer would pay a fee of $178,100 in lieu of replacing
that unit on site or off site.
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Table 1
In -Lieu Fee per Market -Rate Unit by Income Level
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS #17062
Income Level (1)
Average Subsidy
Per Unit
Percent
of Units
In -Lieu Fee per
Market -Rate Units
Very Low (50% of MFI) Rental
$272,000
10%
$27,200
Low (80% of MFI) Rental
$171,000
15%
$25,650
Moderate (120% of MFI) For -Sale
$133,000
20%
$26,640
Weighted Average
$177,000
15%
$26,500
(1) Median Family Income (MFI) as defined by U.S. Department of Housing and Urban Development (HUD)
Year 2007 annual incomes are set at maximum within each category.
Sources: U.S. Department of Housing and Urban Development; Economic & Planning Systems, Inc.
Ec mlc & Planning Systems, Inc. 1011212007
DRAFT
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Table 2
Annual Incomes and Monthly Rents by Income Category
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS#17062
Income Level (1)
1 BR
(2- person HH)
Unit Size
2 BR
(4- person HH)
3 BR
(6-person HH)
Very Low (50% of MFI)
Annual Income
$34,650
$43,300
$50,250
Monthly Income
$2,888
$3,608
$4,188
Monthly Rent (2)
$866
$1,083
$1,256
Low (80% of MFI)
Annual Income
$55,450
$69,300
$80,400
Monthly Income
$4,621
$5,775
$6,700
Monthly Rent (2)
$1,386
$1,733
$2,010
Moderate (120% of MFI)
Annual Income
$83,175
$103,950
$120,600
Monthly Income
$6,931
$8,663
$10,050
Monthly Rent (2)
$2,079
$2,599
$3,015
(1) Median Family Income (MFI) as defined by HUD.
Year 2007 annual incomes are set at maximum within each category.
(2) Monthly Rents are calculated at 30% of gross monthly income.
Sources: U.S. Dept. of Housing and Urban Development; Economic & Planning Systems, Inc
Economic & Planning Systems, lx. 10/12/2007
IRE
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Table 3
Affordable Apartment Value by Income Category and Unit Size
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS #17062
Moderate (120% of MFI)
Unit Size
Monthly Rent
1 BR
2 BR
3 BR
Income Level (1)
(2- person HH)
(4- person HH)
(6- person HH)
Very Low (50% of MFI)
($1,248)
($1,559)
($1,809)
Monthly Rent
$866
$1,083
$1,256
Annual Rental Income
$10,395
$12,990
$15,075
less Vacancy at 5%
$19,505
I6M
754
Effective Gross income
$9,875
$12,341
$14,321
less Operating Expenses
($4,200)
($4,500)
4 8
Net Operating Income
$5,675
$7,841
$9,521
divided by Capitalization Rate
7.00%
7.00%
7.00%
Unit Value
$81,075
$112,007
$136,018
Low (80% of MFI)
Monthly Rent
$1,386
$1,733
$2,010
Annual Rental Income
$16,635
$20,790
$24,120
less Vacancy at 5%
k=
($1,040)
($1,206
Effective Gross Income
$15,803
$19,751
$22,914
less Operating Expenses
($4,200)
($4,500)
($4,8001
Net Operating Income
$11,603
$15,251
$18,114
divided by Capitalization Rate
7.00%
7.00%
7.00%
Unit Value
$165,761
$217,864
$258,771
Moderate (120% of MFI)
Monthly Rent
$2,079
$2,599
$3,015
Annual Rental Income
$24,953
$31,185
$36,180
less Vacancy at 5e /a
($1,248)
($1,559)
($1,809)
Effective Gross Income
$23,705
$29,626
$34,371
less Operating Expenses
($4,200)
450
($4,800)
Net Operating Income
$19,505
$25,126
$29,571
divided by Capitalization Rate
7.00%
7.00%
7.00%
Unit Value
$278,641
$358,939
$422,443
(1) Median Family Income (MFI) as defined by HUD.
Year 2007 annual incomes are set at maximum within each category.
Source: Economic & Planning Systems, Inc.
Economic & Planning Systems, Inc. 10/12/2007
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Table 4
Annual Incomes and Allowable Home Sale Prices by Income Category and Unit Size
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS #17062
Low (80% of MFI
Annual Income
$55,450
Unit Size
$80,400
Home Price (2)
1 BR
2 BR
3 BR
Income Level (1)
(2- person HH)
(4- person HH)
(6- person HH)
Very Low (50% of MFI1
$83,175
$103,950
$120,600
Annual Income
$34,650
$43,300
$50,250
Home Price (2)
$103,950
$129,900
$150,750
Low (80% of MFI
Annual Income
$55,450
$69,300
$80,400
Home Price (2)
$166,350
$207,900
$241,200
Moderate (120% of MFI)
Annual Income
$83,175
$103,950
$120,600
Home Price (2)
$249,525
$311,850
$361,800
(1) Median Family Income (MFI) as defined by HUD.
Year 2007 annual incomes are set at maximum within each category.
(2) Home prices are calculated at three times gross annual income, per City policy.
Sources: U.S. Dept. of Housing and Urban Development; Economic & Planning Systems, Inc.
Economic & Planning Systems, Ina 10112/2007
DRAFT
P: 117000s11 7062NewporOeachWode111 7062Mode1101107.xis
J6�
Table 5
Rental Apartment Development Costs by Unit Size
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS#17062
Improved Land Costs
per Acre
$3,250,000
Unit Size
$3,250,000
Units /Acre
1 BR
2 BR
3 BR
Item
(2- person HH)
(4- person HH)
(6- person HH)
Unit Size
Net Square Feet per Unit
725
1,050
1,250
Gross Square Feet per Unit (1)
853
1,235
1,471
Direct Costs
per Gross Square Foot
$140
$140
$140
per Unit
$119,412
$172,941
$205,882
Indirect Costs
as percent of Direct Costs
35 %
35%
35%
per Gross Square Foot
$49
$49
$49
per Unit
$41,794
$60,529
$72,059
Improved Land Costs
per Acre
$3,250,000
$3,250,000
$3,250,000
Units /Acre
20
20
20
per Unit
$162,500
$162,500
$162,500
Total Costs
per Gross Square Foot
$380
$321
$300
per Unit
$323,706
$395,971
$440,441
(1) Gross square footage is calculated assuming an efficiency ratio of 85 %.
Sources: Market -rate and Affordable Housing Developers; Economic & Planning Systems, Inc.
Economic & Planning Systems, Inc. 10112/2007
DRAFT
P. 07000s117062Newportaeachl Modell f 7062Model f 0l 107. xis
)g1
Table 6
For -Sale Condominium Development Costs by Unit Size
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS #17062
Direct Costs
$335,221
Unit Size
$460,294
per Gross Square Foot
1 BR
2 BR
3 BR
Item
(2- person HH)
(4- person HH)
(6- person HH)
Unit Size
Net Square Feet per Unit
725
1,050
1,250
Gross Square Feet per Unit (1)
853
1,235
1,471
Direct Costs
$335,221
$412,647
$460,294
per Gross Square Foot
$150
$150
$150
per Unit
$127,941
$185,294
$220,588
Indirect Costs
as percent of Direct Costs
35%
35%
35%
per Gross Square Foot
$53
$53
$53
per Unit
$44,779
$64,853
$77,206
Improved Land Costs
per Acre
$3,250,000
$3,250,000
$3,250,000
Units/Acre
20
20
20
per Unit
$162,500
$162,500
$162,500
Developer Profit
Total Other Costs per Unit
$335,221
$412,647
$460,294
% of Total Other Costs
10%
10%
10%
per Unit
$33,522
$41,265
$46,029
Total Costs
per Grass Square Foot
$432
$367
$344
per Unit
$368,743
$453,912
$506,324
(1) Gross square footage is calculated assuming an efficiency ratio of 85 %_
Sources: Market -rate and Affordable Housing Developers; Economic & Planning Systems, Inc.
Economic & Planning Systems, Inc. 1011212007
DRAFT
P. kl7000sll7062NewparlBeachlMade ill7062Mode1101107.xis
L6�
DRAFT
Table 7
Affordable Apartment Subsidy by Unit Size and Weighted Average
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS #17062
Low (80% of MFI)
Unit Size
Value per Unit
1 BR
2 BR
3 BR
Weighted
Income Level
(2- person HH)
(4- person HH)
(6- person HH)
Average (1)
Very Low (50% of MFI)
- $157,945
- $178,106
- $181,670
- $170,755
Value per Unit
$81,075
$112,007
$136,018
$104,436
Cost oer Unit
$323,706
$395,971
$440,441
$375,959
Subsidy per Unit
- $242,631
- $283,963
- $304,423
- $271,522
Low (80% of MFI)
Value per Unit
$165,761
$217,864
$258,771
$205,204
Cost per Unit
$323,706
$395,971
$440,441
$375,959
Subsidy per Unit
- $157,945
- $178,106
- $181,670
- $170,755
Moderate (120% of MFI)
Value per Unit
$278,641
$358,939
$422,443
$339,521
Cost per Unit
$323,706
$395,971
$440,441
$375,969
Subsidy per Unit
- $45,065
- $37,031
- $17,998
- $36,438
(1) Weighted averages assume the following unit mix, based on 2000 Census:
1 BR 40%
2 BR 40%
3 BR 20%
Sources: U.S. Census Bureau; Economic & Planning Systems, Inc.
Economic & Planning Systems, Inc. 10/12/2007
P: 117000s117062NewpotBeachlMode1117062MOde 1101 WAS
,6,
Table 8
Affordable Condominium Subsidy by Unit Size and Weighted Average
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS #17062
Low (80% of MR)
Unit Size
Value per Unit
1 BR
2 BR
3 BR
Weighted
Income Level
(2- person HH)
(4- person HH)
(6- person HH)
Average (1)
Very Low (50% of MR)
- $202,393
- $246,012
- $265,124
- $232,386
Value per Unit
$103,950
$129,900
$150,750
$123,690
Cost per Uni
$368,743
$453,912
$506,324
$430,326
Subsidy per Unit
- $264,793
- $324,012
- $355,574
- $306,636
Low (80% of MR)
Value per Unit
$166,350
$207,900
$241,200
$197,940
Cost per Un
$368,743
$453,912
$506,324
$430.32 6
Subsidy per Unit
- $202,393
- $246,012
- $265,124
- $232,386
Moderate (120% of MR)
Value per Unit
$249,525
$311,850
$361,800
$296,910
Cost per Unit
$368,743
$453,912
$506,324
$430,326
Subsidy per Unit
- $119,218
- $142,062
- $144,524
- $133,416
(1) Weighted averages assume the following unit mix, based on 2000 Census:
1 BR 40%
2 BR 40%
3 BR 20%
Sources: U.S. Census Bureau; Economic & Planning Systems, Inc.
Ec mlc & Plannkg Systems, Inc. 1011212007
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APPENDIX A
p-
FI:_
Appendix A
Development Industry Contacts
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS#17062
Company
Contact
Website
Affordable Developers
Jamboree Housing
Laura Archuleta
www.jamboreehousina com
National Community Renaissance (National CORE) (1)
Byron Ely
www.schdc.orc
Olson Company
John Reischl
www theolsori com
Related Companies (1)
Gino Canon
www.related.com
The Irvine Company (1)
Dan Miller
www.irvinecompany.com
Market Rate Developers
Brookfield Homes
John O'Brien
www.brookfieldhomes.00m
Centex Homes (1)
David Hutchins
www.oentexhomes.com
Fieldstone Homes
John Laing Homes (1)
Ralph Debbisch
Jennifer Shirk
www.fleldstone- homes.com
www.iohniainghomes.com
Lennar Homes (1)
Donna Kelly
www I nnnar,com
Pardee Homes
Kristy Scott
www.i)ardeehomes.com
Richmond America Homes
Shea Homes (1)
Jeff Hollenbeck
Bob Gillis
www.dchmondamerican.com
www.sheahomes.com
Standard Pacific Homes
Kathie Villan
www.standardoacifichomes.com
Warmington Homes (1)
Jared Knickmeyer
www.warminutonhomesca.com
William Lyon Homes (1)
Pat McCabe
www lyonhomes com
Other
Building Industry Association of Orange County
Brian Starr
www biaoc.com
(1) EPS conducted phone interviews with the representatives of these companies regarding the preliminary development cost, revenue,
and valuation assumptions.
Source: Economic & Planning Systems, Inc.
Economic & Plannimg Systems, Inc 10/122007
P117000s117062New wtBeachIModeN17062Modd101107.x)s
1 [ 3
Economic &
Planning Systems
Read Esmle Ecc.mke
Regiowd Ernwmics
Public Rwam
Lm Ul Pudicy
APPENDIX B
1 �q
Appendix B
Rental Rate Survey
City of Newport Beach Affordable Housing In -Lieu Fee Study; EPS #17062
Apartment Complex
1 BR
(2- person HH)
Monthly Rents
2 BR
(4- person HH)
3 BR
(6- person HH)
Baypointe
$1,899
$2,229
-
Bayport
$1,590
$1,880
$2,425
Bayview
$1,590
$1,880
$2,425
Baywood
$1,590
$1,880
$2,425
Mariner's Square
$1,790
$2,240
$2,485
Newport Bluffs
$1,815
$2,295
$3,040
Newport North
$1,516
$1,845
-
Promontory Point
$2,195
$2,395
-
The Colony
$2,705
$3,015
-
Newport Ridge
$1,905
$2,215
-
Coronado at Newport South
$1,099
$1,679
-
Coronado at Newport North
$1,199
$1,649
-
Fairway at Big Canyon
$2,150
$3.400
-
Average
$1,773
$2,200
$2,560
Low
$1,516
$1,649
$2,425
High
$2,705
$3,400
$3,040
Income Level (1)
Very Low (50% of MFI)
$866
$1,083
$1,256
Low (80% of MFI)
$1,386
$1,733
$2,010
Moderate (120% of MFI)
$2,079
$2,599
$3,015
(1) See Table 2.
Sources: City of Newport Beach; Economic & Planning Systems, Inc.
Economic & Plsnnmg Systems, Inc. 10/12/2007
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P:117000s117062Newportgea hWoMtl7062ModeH01107xts
�6