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TRANSMITTAL

To: Date:
MOV 11$8 2015
NOV 2015
THE COUNCIL
From:
THE MAYOR

TRANSMITTED FOR YOUR
YOUR CONSIDERATION.
CONSIDERATION. PLEASE SEE
SEE ATTACHED.

y 7,

Ana Guerrero
Guerrero

ERIC GARCETT
Mayor
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Los Angeles
HOUSING+COMMUNITY
HOUSING + COMMUNITY Eric Gametti,
Eric Garcetti, Mayor
Mayor
Investment Department
Investment Department D. Cervantes, General
Rushmore D. General Manager
Manager

Planning &
Strategic Planning & Policy
Policy Division
Division
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November 17,
17, 2015

13-1389
Council Files: 13-1389
13- 1624
13-1624
14-
14-0361 0361
14-0600-S123
14-0600-S123
Council District(s): All
Contact Person(s):
(213) 808-8405
Rushmore Cervantes (213) 808-8405
Edwin Gipson (213) 808-8597
Monterrosa (213)
Claudia Monterrosa (213) 808-8650
808-8650

The Honorable Eric Garcetti
Mayor, City of
of Los Angeles
200 N. Spring Street, Room 303
Los Angeles, CA 90012

Attn:
Attn: Mandy
Mandy Morales,
Morales, Legislative
Legislative Coordinator

REPORT BACK IDENTIFYING
REPORT IDENTIFYING LOCAL,
LOCAL, PERMANENT
PERMANENT FUNDING
FUNDING SOURCE(S)
SOURCE(S) FOR THE
THE
CITY’S AFFORDABLE HOUSING TRUST FUND (AHTF)
CITY'S (AHTF) AND REQUEST TO FUND A NEW
AFFORDABLE HOUSING BENEFIT FEE STUDY.

SUMMARY
In response to the worsening housing affordability crisis in Los Los Angeles,
Angeles, six of Los
Los Angeles’ City Council
Angeles' City
members, Gilbert
members, Gilbert Cedillo,
Cedillo, Mitch
Mitch O’Farrell, Fuentes, Curren Price, Bob Blumenfield
O'Farrell, Felipe Fuentes, Blumenfield and
and Mike
Mike
Bonin representing both high income and very low income areas of of the City, put forth Motions requesting
report to
a report to analyze
analyze and
and identify
identify potential
potential local
local permanent
permanent funding
funding sources
sources for
for affordable
affordable housing
housing
financing, including a voter-approved bond measure, a fee on new development and earmarking a percent
incremental annual
of the incremental annual property
property tax
tax revenue
revenue among
amongothers. Council’s
others. On October 8, 2014, the City Council's
Housing Committee
Housing Committee reconstituted
reconstitutedthe
the various
various Motions
Motionscalling
callingfor
for the Angeles Housing
the Los Angeles Housing and
and
Community Investment
Community InvestmentDepartment
Department(HCIDLA)
(HCIDLA) to toissue
issuea areport
report with
with aa comprehensive
comprehensive set of
set of
recommendations that
recommendations that addresses
addresses all
all of the Motions (Council
(Council file numbers 14-0600-S123,
14-0600-S123, 14-0361,
14-0361, 13-
13­
1389, and 13-1624).
1389,

After researching
After researching various
various local
local and non-local funding
and non-local funding options
options for local affordable
for a local affordable housing
housing fund,
fund,
including a survey of
of tools used by other cities, HCIDLA through this report, presents a recommendation
for a local permanent funding source through an Affordable Housing Benefit Fee program. The The proposed

An Equal Opportunity/
Opportunity / Affirmative
Affirmative Action Employer
New Affordable Housing Benefit Fee Study
Page 2

program would establish a one-time monetary charge levied on new developments to assist the City
City with
financing affordable housing activities.

HCIDLA is recommending an Affordable Housing Benefit Fee over other potential tools described
described in this
transmittal based on an extensive review of
of other cities throughout the country, which compared one-time
versus
versus long-term,
long-term, sustainable
sustainablerevenue
revenuegenerating
generatingmethods.
methods. Of the
the various
various methods
methods reviewed,
reviewed, the
the
utilization
utilization of an Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee has
has been
been the most viable
viable and
and consistent
consistent method
method of
generating a permanent funding source.
source. While
While other
other options
options may
may generate
generate larger
larger funding, such
such as
as a bond
measure, these funds are short-term solutions with finite funding.

This recommendation aligns
aligns with the affordable housing goals of Mayor Garcetti, including his support
for studying a new Affordable Housing Benefit Fee that would create a dedicated, local stream of
of funding
for affordable housing activities.

HCIDLA recommends pursuing an Affordable Housing Benefit Fee while concurrently examining and/or
implementing other large-scale affordable housing initiatives in the near future such as new preservation
and rehabilitation loans, the creation of a new Housing Finance Agency, and the potential for supporting
supporting
new Community
Community Revitalization
Revitalization and Investment
Investment Authorities
Authorities and/or
and/or Enhanced
Enhanced Infrastructure
Infrastructure Finance
Finance
Districts.

In 2011,
2011, the
the City's
City’s Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee study
study found
found aa close
close correlation
correlation between
between new
new
development and housing demand. Since that study was published four years ago, HCIDLA recommends
a new study that reflects the City's
City’s current
current economic
economic environment.
environment. The new studystudy should
should examine
examine any
potential fee in the context of
of other impact fees imposed on new development.

Based on the study results, a detailed
detailed framework for an
an Affordable
Affordable Housing Benefit Fee Ordinance
Ordinance will
be developed by the Department ofof City Planning, in close coordination with HCIDLA, for
for review by the
Planning Commission, the City Council and the Mayor.

RECOMMENDATIONS
The General Manager of of the Los
Los Angeles
Angeles Housing
Housing and
and Community
Community Investment
Investment Department
Department (HCIDLA)
(HCIDLA)
respectfully requests that:

I. Your
I. Your office
office schedule
schedule this
this transmittal
transmittal at the
the next
next meeting(s)
meeting(s) of
of the
the appropriate
appropriate City
City Council
Council
committee(s) and forward it to the City Council for review and approval immediately thereafter;

II. The City Council, subject to the approval of the Mayor,
II. Mayor, take the following actions:
actions:

A. INSTRUCT
A. INSTRUCT the the City
City Administrative
Administrative Officer
Officer to
to identify
identify the
the source
source of funding
funding for up to
$500,000 for the Department of City Planning, in close coordination with the Los Angeles
Housing
Housing andand Community
Community Investment
InvestmentDepartment,
Department,totoexecute
executeaa contract
contract for
for the
the
development ofof a new Affordable Housing Benefit Fee study and to effectuate the transfer
of funds to the Department of City Planning in the next Financial Status Report.
of

B. AUTHORIZE
B. AUTHORIZE the the General
General Manager,
Manager, HCIDLA,
HCIDLA, or or designee
designee to
to prepare
prepare Controller
Controller
instructions
instructions and
and make any necessary technical
technical adjustments
adjustments consistent with Council
Council and
and
Affordable Housing Benefit Fee Study
New Affordable
Page 3

Mayor actions on this matter,
matter, subject to the
the approval
approval of
of the
the City
City Administrative
Administrative Officer,
Officer,
and authorize the Controller to implement these instructions.

BACKGROUND
A Transforming and Expensive City
The severe lack of affordable housing is a pervasive
pervasive problem
problem facing
facing the
the majority
majority ofof City
City residents.
residents. Today,
working-class and middle-class
working-class and middle-class Angelenos,
Angelenos, both
both renters
renters and owners,
owners, in Los Angeles face high housing
costs.
costs. The
The significant
significant urban
urban renewal
renewal taking
taking place in many
many ofof the
the city's
city’s traditional
traditional lower
lower income
income and
and
diverse
diverse neighborhoods
neighborhoods isis further
further exacerbating
exacerbating the the high
high housing
housing costs.
costs. Recently
Recentlytransformed
transformed
neighborhoods like Venice
neighborhoods like Venice Beach,
Beach, Silver Lake
Lake and Echo
Echo Park have become expensive areas to live and
out of reach for most Angelenos.
Angelenos. Already
Already new
new urban
urban renewal
renewal pressures
pressures are
are being
being felt
felt in
in long
long neglected,
neglected,
typically poor, areas of
of the east and south regions of
of the City such as the Figueroa Corridor, Leimert Park,
Highland Park, Boyle Heights
Heights and Westlake
Westlake among
among others.
others. This
This ongoing
ongoing transformation in in many of
of Los
Angeles'
Angeles’ older
older established
established neighborhoods
neighborhoods maymay be
be a positive change
change for commercial
commercial corridors
corridors and for
homeowners whose increased
homeowners whose increased property
property values
values are
are aa welcomed
welcomed asset.
asset. However,
However, revitalization
revitalization can alsoalso
have a devastating impact for low-income renters who are least able to withstand increasing housing costs.

Much
Much of this urban
urban renewal
renewal comes comes onon the
the heels
heels ofofan
anunprecedented
unprecedented $40 $40 billion
billion government
government funded
funded
transportation expansion in the region and the added value has invited much needed investment, but also
speculators to "fix
“fix and flip"
flip” properties that in turn contribute to increasing housing costs in the surrounding
areas. The
The City
City is
is challenged
challenged to to encourage
encourage revitalization and investment while simultaneously promoting
neighborhood stability. ItIt is
neighborhood stability. is aa timely
timely moment
moment for
for the
the City
City to
to seize
seize the
the opportunity
opportunity and
and reap
reap the benefits
benefits
from this revitalization to help create a more equitable and sustainable housing market with more choices.

The State ofof Housing and Affordability Gaps
A contributing factor to the acute housing affordability problem is a mismatch between what is being built
and what needs to to be built.
built. In
In 2013
2013 (the
(the most
most recent
recent year
year for
for which
which full
full data
data are
are available),
available), of
of the 1,605
1,605
units needed for low-income
units needed households in
low-income households in the
the City
City of
of Los
Los Angeles
Angeles only
only 593
593 were
were built.
built. Los
Los Angeles
Angeles
added 37 percent of the needed housing for low-income residents but nearly 150 percent (5,874 units) of
the units needed
needed by above
above moderate
moderate income
income earners.
earners. In spite of
of the economic recovery and accompanying
increases in
in multifamily
multifamily production,
production, newnew apartment
apartmentrents
rentsare
arenot
notreachable
reachablebybylower
lowerincome
incomefamilies.
families. An
inability to supply enough housing for diverse income groups is contributing to eroding confidence in Los
Angeles'
Angeles’ potential toto promote income
income and social mobility.

The average rent in Los Angeles
Angeles is is $2,0311
$2,031' while new apartments built in the preceding ten years rent for
$2,609 and have a 12
$2,609 12 percent vacancy rate2; a 55 percent vacancy rate indicates that supply supply and
and demand
demand
are in balance.
balance. At
At these
these rental
rental rates,
rates, families
families must
must earn
earn $81,240
$81,240 to
to afford
afford the average
average rent and
and $104,360
$104,360
to afford a newly built apartment.
apartment. In In reality,
reality, the
the Los
Los Angeles
Angeles median $50,5443 and
median income is only $50,5443 and the
current living wage ofof $15 per hour translates to $26,2504 in annual wages; both wages leave a tremendous
wage gap
gap for workers
workers seeking
seeking toto rent
rent in
in Los
Los Angeles.
Angeles. TheThe high
high vacancy
vacancy rate for
for newer,
newer, more expensive
housing exemplifies
exemplifies the
the disparity
disparity in the type of housing being built demonstrating that new, higher cost
housing, is out of
of reach for many Angelenos.

1 Real Facts Online. City of
of Los Angeles, Average Asking Rent 2014
22 Real Facts Online. City of
Online. City ofLos
Los Angeles,
Angeles, Market
Market Overview
Overview Average Occupancy Rate 2014
33 U.S. Census. American Community Survey 2014
4 Flaming, D.,
4 D., Bums,
Burns, P. Effects of a Fifteen Dollar an Hour Minimum
Minimum Wage
Wage in
in the City of Los Angeles 2013
Housing Benefit
New Affordable Housing Benefit Fee
Fee Study
Page 4

On the homeownership front, Los Angeles is the second-least affordable region in the country for middle-
class people seeking to buy a homes.
home5. The
The median
median priced
priced home of
of $560,0006 in Los Angeles is more than
two-and-a-half
two-and-a-half times
times the
the average
average national
national home
home price
price ($208,900)7.
($208,900). Such
Such high home
home prices require
require a
conventional monthly mortgage payment of of $3,146 with corresponding annual earnings that are upwards
of
of $125,000.

Across the board,
board, rental and
and homeownership
homeownership housing costs
costs exceed what the median income or middle
middle
class can afford, in particular given the stagnation of
of incomes in the city since 2007 (see Attachment 1).

SOLUTIONS IN CITIES WITH SIMILAR HOUSING CHALLENGES
Cities with high housing costs are narrowing the affordable housing gap through local funding initiatives
that help put housing within reach ofof low-income households.
households. Staff
Staffcompared
compared LosLos Angeles
Angeles to cities
cities with
similar affordable
affordable housing challenges.
challenges. Commonalities
Commonalities amongamong the
the select
select cities
cities include
include anan expensive
expensive real
estate market, robust economic growth, a high rent burden, and a large renter population that exceeds the
number of homeowners.
homeowners. The Theresearch
researchrevealed
revealedthat
thatfive
fiveout
out of
ofthe
the six
six comparison
comparison cities
cities recently adopted
or updated a housing plan with local
local dollars
dollars dedicated
dedicated to affordable
affordable housing financing
financing and strategies
strategies to
increase
increase the
the future
future local
local funding commitment
commitment (see (see bar
bar graph
graph below).
below). The
The blue
blue bar
bar illustrates
illustrates the fiscal
fiscal
year 2014-2015 local commitments ranging from a high of over $800 million in New York City to a low
of
of $20 million in the
the City of Boston.
Boston. In
In fiscal
fiscal year 2015-2016, Los Angeles’
Angeles' Mayor
Mayor Garcetti
Garcetti made a $10
million contribution to the Affordable Housing
Housing Trust Fund;
Fund; $5
$5 million
million from
from the
the City’s
City's general fund, and
another $5 million from a future hotel tax on short term rentals.

5 HarvardUniversity's
'Harvard University's Joint
Joint Center
Center for
for Housing
Housing Studies
'Data
6 DataQuick
QuickCalifornia
CaliforniaHome
HomeSale
SaleActivity
Activityby
by City
City -- 2014
2014 City
City Chart
77 United States Federal Reserve Bank.
Bank. Median
Median Sales
Sales Price
Price of
of Existing Single-Family Homes. 2014
Fee Study
New Affordable Housing Benefit Fee
Page 5

High Housing
Cities with High Housing Costs: Local
Local Affordable
Affordable Housing
Commitment
$806.5
$806.5 in Millions)
(Numbers in Millions)
2014-2015
2014 - 2015
200

$145.5
$145.5
$121.2
$121.2

100
100 $79.0
$79.0
$58.6
$58.6
$33.8
$33.8
$16.5
$16.5 $20.0 $20.9
$20.9
$4.2
$4.2 $4.2
$4.2 $1.3
$1.3 r, $4.5
$4.5 $0.0
00
New York San Francisco Chicago Washington, Seattle Boston Los Angeles
Los Angeles
D.C.

LOCAL HOME
LOCAL HOME

*New York City’s graph size is
City's bar graph is not
not drawn
drawn to scale.
scale.

Los Angeles'
Los Angeles’ reliance
reliance on on diminishing
diminishing federal
federal resources
resources will cause aa dramatic
will cause dramatic decrease
decrease inin housing
housing
production. At
production. At its
its height,
height, inin2008,
2008,the theAffordable
Affordable Housing
Housing Trust
Trust Fund
Fund (AHTF)
(AHTF) allocation
allocation was $108
$108
Today, the
million. Today, the total
total funding
funding isis approximately
approximately $27$27 million,
million, all
all of
ofwhich are federal funds and program
income. The
income. The rising
rising housing
housing costs
costs and
and shrinking
shrinking public
public funds
funds are
are prompting many cities to implement or
reinvigorate their own local funding resources such as housing linkage fee programs or levies to help fund
local trust funds
funds and other affordable housinghousing programs. The affordable
programs. The affordable housing challenge is universally
shared by the cities highlighted above and all, all, but the City of
of Los Angeles, are
are responding with locally
created solutions.

LOCAL AFFORDABLE HOUSING FUNDING OPTIONS
An improving economy with increasing investment provides provides the City an opportunity to expand housing
options for families and children
options children as well as improve housing stability in neighborhoods
neighborhoods to to get ahead of
the inevitable
inevitable market
market forces
forces that
that threaten
threaten toto displace
displace long-time,
long-time, often
often lower
lower income
income residents.
residents. Based on
the comparison of other cities with high housing costs, below are several options for new local programs
measures to help generate
and measures generate revenue to create
create and
and preserve
preserve affordable
affordable housing
housing and thereby
thereby promote
promote
upward mobility
upward mobility and
and opportunity
opportunity for
for all. At aa glance,
all. At glance, the
the funding
funding options
options HCIDLA
HCIDLA researched
researched are as
follows:


■ Affordable Housing Benefit Fee: A linkage linkage fee
fee for
for all
all new
new development.
development. This requires
approval of
of the City Council and the Mayor to enact through a local ordinance.

■ Housing Bond Measure: A bond measure to approve new property tax revenues for affordable
housing. This
housing. This requires
requires aa ballot
ballot measure
measure with a two-thirds vote.

■ Housing
Housing Levy:
Levy: A citywide tax that authorizes
authorizes additional
additional regular
regular property
property taxes
taxes to
to be used for
affordable housing. This requires
housing. This requires aa ballot
ballot measure with a two-thirds vote.
Benefit Fee Study
New Affordable Housing Benefit
Page 6

■ Enhanced
Enhanced Infrastructure
Infrastructure Financing
Financing District (EIFD): A financing
District (EIFD): financing authority for cities
authority for cities to
to
construct and rehabilitate infrastructure, including affordable housing, by capturing local property
tax growth
growth within
within a district’s boundaries. New
district's boundaries. New districts
districts are
are adopted
adopted by resolution.
■ Community Revitalization and Investment Authority (Authority): A financing authority for
cities to construct and rehabilitate infrastructure
infrastaicture by capturing local property tax growth within an
authority’s boundaries, it requires a 25 percent set-aside
authority's set-aside for affordable
affordable housing. New authorities
housing. New authorities
are adopted by resolution
■ Former
Former Tax Increment Set-Aside:
Set-Aside: Permanently
Permanently earmarking
earmarking aa percent
percent of the former
fonner CRA tax
revenue to the Affordable
Affordable Housing Trust Fund. approval of
Fund. This requires approval ofthe City
City Council and the
Mayor to enact a permanent allocation from the General Fund. Fund. However, this funding is currently
absorbed in the General Fund and pays for a variety of City services.
■ Fees on Real Estate Recording Instruments: Similar to Assemblymember Atkins’ Atkins' AB1335 bill,
Los Angeles County could impose a new document recording fee on real estate transactions. Any
potential effort to impose fees on real estate transactions at the local level should be considered in
context with ongoing statewide initiatives.

Affordable Housing Benefit Fee
The Affordable Housing Benefit Fee program (alternatively referred to as a housing impact fee or linkage
fee program) is a one-time
one-time monetary charge levied on new developments to assist a City with a percentage
of the cost related
of related to
to the
the additional
additional housing
housing needs
needs of
of employees
employees in in said
said developments.
developments. The legal basis for
the fee program is is that
that aa portion
portion of the
thejobs
jobs created
created by
by new
newproperty
property developments
developments areare low
lowpaying.
paying. When
wages are low, workers are unable to afford the market rate rate rent
rent and
and therefore
therefore demand affordable housing.
difference between
The difference between what households
households at various income
income levels
levels can afford to pay, by only dedicating
30 percent of income toward rent, and the average market-rent is the income gap that is referred to as the
“earned income deficit”.
"earned The portion
deficit". The portion ofoflow
low paying
paying jobs inin each
each new
new development
development differs
differs depending on
development type.
the development The City's
type. The City’sfirst
first Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee study
study was
was completed
completed in 2011 and
found a close
it found close correlation
correlation between
between newnew industrial,
industrial, commercial,
commercial, and residential
residential construction,
construction, and the
demand for
demand for new
new affordable
affordable housing.
housing. TheThe study
study meets
meets the
the California
California Mitigation
Mitigation Fee Act (Gov.
(Gov. Code
Code
sections 66000 et seq) requirement that a fee be "roughly
“roughly proportional”
proportional" in nature and relate to the impact
of the proposed development.
of development. This is important because it establishes a quantifiable justification for the
fee.

The fee is typically charged on a square foot basis to new commercial
commercial and/or residential development and
it is established through the adoption ofof a local ordinance with approval of
of the City Council and the Mayor.
linkage fees
While linkage fees of this sort
sort are
are criticized
criticized for
for potentially
potentially burdening the development
development community, the
right policy can minimize
minimize the impact.
impact. This type of fee program helps the City provide reasonably priced
housing for workers
workers so
so that the City's
City’s overall
overall economic
economic health is unaffected and demand for goods and
services persists.

Per this transmittal, HCIDLA seeks to initiate a new nexus study to reflect current economic and housing
reflect current
market conditions. The new
conditions. The new study
study is
is critical
critical for
for designing
designing a linkage fee program that minimizes negative
impacts to the development community while still providing significant resources to help the City finance
affordable housing opportunities.
New Affordable Housing Benefit Fee Study
Page 7

Bond Measure
A Citywide bond measure
measure isis another option for
for creating
creating aa local
local affordable
affordable housing
housing fund.
fund. The recent past
shows City residents strongly support a local bond to fund affordable housing. However despite this strong
support, in 2006, during the housing bubble peak,
peak, the
the City’s
City's affordable housing bond, Measure
Measure H, failed
small margin
to pass by a small margin with 6363 percent
percent voting
voting in
in favor
favor and
and 37
37 percent
percent voting
voting against
against the
the proposed
proposed
housing bond.
bond. The
The$1$1billion
billionbond
bondmeasure
measurewould
would have
have resulted
resulted in
in an
an average
average annual
annual city
city debt
debt service
service
payment of approximately $58 million per year for 30 years.

Some challenges
challenges inin creating
creating a bond measure include
include an extensive
extensive and expensive campaign
campaign as as well
well as
added debt.
debt. This
This type
type of
ofbond
bond must
must be
be repaid
repaid byby the
the City
City of
ofLos
Los Angeles
Angeles from
from additional
additional property
property tax
revenues based upon the assessed value of of all taxable property, creating more City debt and competition
competition
for other City services
services funded
funded through
through a ballot
ballot measure.
measure. Additionally, a ballot measure
measure of
of this sort requires
a two-thirds vote of qualified electors in the City.

Housing Levy
Another option
option explored
explored for establishing
establishing a local source of funding for affordable
affordable housing includes
includes the
implementation of a citywide tax levy that authorizes additional regular property taxes to be dedicated to
affordable housing.
housing. A A housing
housing tax
tax levy
levy would
would require
require a ballot initiative with a majority- two-thirds- voter
approval. The
The levy
levy could
could be
be set
set for
for aa limited
limited time
time period and may be re-authorized by by voters.

The City of Seattle, Washington, has
Seattle, Washington, has had
had several
several housing
housing levies
levies since
since 1981.
1981. The latest
latest levy,
levy, approved in
November 2009, provides $$145 years. The
145 million over seven years. The cost
cost to
to aa property
property owner
owner isis a percent of
of the
assessed property value.
value. The current Seattle Levy costs the owner of a median priced home home ($475,000)
($475,000)
$60 per year or $5 per month.

The tax levy approach isis a way
way of spreading
spreading the
the responsibility
responsibility to
to provide
provide affordable housing opportunities
across all property owners so that all share the burden in a uniform manner with minimum overall impact
to individual property owners.
individual property owners. Similar
Similar to
to aa housing
housing bond
bond measure,
measure, a tax
tax levy
levy requires
requires dedicated
dedicated City
resources for a ballot measure campaign.
campaign. Unlike
Unlike aa bond
bond measure, however, aa levylevy does not require a debt
service from the City, since it is paid through an additional property tax.

Enhanced Infrastructure Financing Districts (EIFD)
In 2014, the California legislature authorized the Enhanced Infrastructure Financing Districts (EIFD) as a
new financing authority for cities to construct and rehabilitate infrastructure by capturing a portion of
of the
growth in local
local property
property taxes
taxes within
within aa targeted
targetedarea.
area. New districts are
are adopted by
by resolution.
resolution. Those
Those that
issue tax increment bonds
bonds to attract private capital must obtain 55 percent of of the popular vote within the
district boundaries.

While specific
specific affordable housing set-asides
affordable housing set-asides are
are not required
required of EIFDs, cities may
may identify
identify affordable
affordable
housing as a goal for an
an EIFD
EIFD targeted area.
area. EIFDs
EIFDs may
may invite
invite other
other local
local taxing
taxing entities
entities to
to join; limited
participation may diminish
participation may diminish the
the potential revenue
revenue sources. Where community
sources. Where community opposition
opposition to to an EIFD is
strong there may
strong there may bebe a tendency to push
tendency to push the
the location of a district
location of district out of core
core areas
areas in
in the
the City
City where
where
affordable housing is most needed.

Community Revitalization
Revitalization and Investment Authority (Authority)
In 2015,
2015, The
The Governor
Governor signed
signed AB2
AB2 (Alejo)
(Alejo) creating
creating aaCommunity
Community Revitalization
Revitalization and
and Investment
Investment
Authority that diverts
Authority that diverts tax
tax increment
increment (of
(of consenting
consenting local
local agencies)
agencies) to
to infrastructure
infrastructure projects
projects in
in
Study
New Affordable Housing Benefit Fee Study-
Page 8

disadvantaged communities, it requires a 25 percent set-aside for affordable housing. New authorities are
adopted by resolution.

Community Revitalization and Investment Authorities may invite other local taxing entities to to join except
for the LA
LA Unified
Unified School
School District;
District; limited
limited participation
participation may diminish
diminish the
the potential
potential revenue
revenue sources.
sources.
Where community
community opposition
opposition to
to an
an Authority is strong there
is strong there may
may be a tendency to push the location of
the Authority out of core areas in the City where affordable housing is most needed.

Permanently Earmark a Portion
Portion ofof the City's
City’s Former Tax Increment
Increment to the AHTF
AHTF
One of
of the
the original
original purposes
purposes ofof former
former tax
tax increment
increment funds
funds was
was to
to create
create low-
low- andandmoderate-income
moderate-income
housing within
within redevelopment
redevelopment areas;
areas; with
with aa minimum
minimum of of 20
20 percent
percent dedicated
dedicatedto to very
very low-income.
low-income. In
keeping with this intended purpose, last year, HCIDLA made a recommendation to dedicate 25 percent of
the former tax increment coming to
increment coming to the City ofof Los Angeles'
Angeles’ General
General Fund
Fund to to the
the Affordable
Affordable Housing
Housing
Trust Fund (AHTF) beginning in fiscal
fiscal year 2014-2015.
2014-2015. Alternatively,
Alternatively, HCIDLA
HCIDLA also also proposed
proposed a phased-
in approach to achieve a maximum annual dedication of of 35 percent ofof the former tax increment
increment dollars
dollars to
AHTF. Based
the AHTF. Based on
on an
anannual
annualprojection
projection of of$49
$49million
million in
inunrestricted
unrestricted former
former tax tax increment
increment dollars
dollars
contributed to the City’s
City's General
General Fund,
Fund, these
these proposals
proposals (Council
(Council File #14-0361)
#14-0361) wouldwould provide
provide between
between
$12 million and $17 million annually to the Trust Fund.

Making a Trust Fund allocation means that a portion of of the former redevelopment funds are not available
for alternate uses.
uses. Currently,
Currently, this
this revenue
revenue isis funding
funding aa variety
variety of
of other
other critical City
City services
services as
as part of
of the
General Fund.
Fund. The Mayor has recently committed to contributing $10 million from the General General Fund to
the Affordable Housing Trust Fund in future annual budgets, which is 60 to 80 percent of of what the CF14-
0361 motion would have achieved.
0361

Fees on Real Estate Recording Instruments
Similar to Assemblymember Atkins AB1335
Assemblymember Atkins AB1335 bill,
bill, Los
Los Angeles
Angeles County could impose a newnew document
document
recording fee
recording fee on real estate transactions
estate transactions but statewide
statewide legislation clarifying the county’s authority to
legislation clarifying the county's authority
impose said fee may be necessary. The local county fee would also require a countywide ballot measure.
The resulting funding would likely be administered and controlled by the county.

FEDERAL,
FEDERAL. STATE AND OTHER FUNDING SOURCES
New affordable housing funding streams from Sacramento and Washington D.C. epitomize the magnitude
of the problem
problem and
and the
the urgency
urgency toto address
address this
this crisis.
crisis. This new funding has limitations
limitations however.
however. These
These
sources
sources are competitively awarded and
competitively awarded and the
the City ofof Los
Los Angeles is not guaranteed
guaranteed aa minimum
minimum funding
funding
level, and many require
require a local
local match,
match. Further,
Further, without
without aa local
local commitment,
commitment, City City projects are
are unable to
leverage these outside sources
sources competitively.
competitively. Other
Other funds
funds are
are highly
highly restrictive
restrictive and
and may
may only
only be used for
very specific
specific populations,
populations, limiting
limiting the
the City’s
City's ability to use the dollars where the local local need
need is
is greatest.
greatest.
Below is a snapshot of said funding streams.
streams. With
With thethe exception
exception of
ofthe
the National
National Housing
Housing Trust
Trust Fund,
Fund,
expected to distribute funding in 2016, all other sources are available beginning in 2015.
New Affordable Housing Benefit Fee Study
Page 9

"ederal, State and Other Competitive Funds
Federal,
National Housing A HSC
AHSC Multifamily Prop 41 L.A. County
Trust Fund Housing
Program
$TBD* $400M** $100M $545M*** $75M****
(annual allocation) (FY 15/16
15/16 (one-time) (limited duration) (limited duration)
allocation)
*Amount to be determined after the Federal Housing & Transportation
Transportation budget is finalized.
finalized.
**Scheduled to end in 2020
***$75 in 2015 with $545 million in total funds
*$75 million awarded in funds available over several years
years
*$15 million awarded annually with $75 million in total funds
****$15 funds available through annual NOFAs ending in 2018

These new state and federal funds are
are very
very timely,
timely, however
however they
they are
are significantly
significantly diminished
diminished resources.
resources.
As an example, the California redevelopment agencies generated $1 $ 1 billion annually meanwhile the new
statewide source of
of funding for affordable housing is the Affordable Housing and Sustainable Community
(AHSC) program currently
(AHSC) program currently funded
funded at
at $400
$400 million.
million. This
This represents
represents a very small portion ofof the funding
funding
amount that is needed. The Multifamily
Multifamily Housing Program has one-time funding and the remaining sources
have sunset dates in the next 5 years.

appropriations process or
Relying solely on these outside funds makes the City vulnerable to an annual appropriations
competitive criteria that may not necessarily include the local long-term public policy priorities.

National Housing Trust
Trust Fund
The National Housing Trust Fund (NHTF) will provide communities with funds to build, preserve, and
rehabilitate rental homes that are affordable for extremely- and very low-income households. The NHTF
is targeted toward rental
targeted toward rental housing,
housing, at
at least
least 90
90 percent
percent of the funds
funds must bebe used
used for
for the
the production,
production,
preservation, rehabilitation, or
preservation, rehabilitation, or operation
operation of
of rental
rental housing.
housing. At
At least
least 75
75 percent
percent of the funds
funds for
for rental
rental
housing must benefit extremely
housing must extremely low-income households and
low-income households and all
all funds must benefit
benefit very
very low-income
low-income
households.
households. The
TheNational
National Housing
Housing Trust
Trust Fund,
Fund, per
per 2010
2010 interim
interim adopted
adopted regulations, will
will provide block
grants directly to the states.

Funding allocations are expected in 2016 and are based on Fannie
Fannie Mae
Mae and
and Freddie
Freddie Mac’s
Mac's future business.
The amount of of funding for 2016 is still being
being determined
determined through the
the federal
federal appropriations
appropriations budget process
there are several
and there several attempts
attempts to eliminate the
to eliminate the funding
funding altogether. final outcome
altogether. The final outcome of
of the NHTF
NHTF is
contingent upon the
contingent upon the FY16
FY16 Federal
Federal Budget
Budget appropriations
appropriationsprocess.
process. At this time, California's
California’s portion is
still unknown.

Affordable Housing and Sustainable Community (AHSC)
AHSC, a new funding program under California's
California’s Cap and Trade
Trade program, places a "cap"
“cap” onon aggregate
aggregate
greenhouse gas (GHG)
greenhouse gas (GHG) emissions
emissions from
from businesses
businesses responsible
responsiblefor
forstate’s
state's GHG
GHG emissions.
emissions. Businesses
Businesses
“trade” (buy and sell) carbon allowances
"trade" allowances on
on the
the open
open market. Proceeds from
market. Proceeds from the
the sale
sale of
of allowances
allowances are
dedicated to projects that reduce GHG emissions that contribute to climate change.

of the proceeds from cap-and-trade funds the newly created AHSC program that is tasked with
A portion of
reducing greenhouse gases
gases by encouraging the development
development of affordable housing near transit to create
create
fewer car trips and vehicle miles
miles travelled.
travelled. The
The AHSC program will receive 20 percent ofof the annual cap-
and-trade auction revenues projected to be approximately $2.2 billion which translates to $400 million for
Housing Benefit Fee Study
New Affordable Housing
Page 10

State’s 2015-2016
the State's 2015-2016 fiscal
fiscal year
year budget. The funding
budget. The funding isis competitive
competitive and
and requires
requires aa local
local financing
financing
commitment.

of California Multifamily Housing Program (MHP)
State of
The Multifamily
Multifamily Housing
Housing Program
Program (MHP)
(MHP) at the California
California Department
Department of Housing
Housing and
and Community
Community
Development received a one-time allocation of $100
$100 million
million in
inthe
the State’s
State's 2014-2015
2014-2015 budget.
budget. Half
Half of
of this
funding is designated for supportive housing development. This is
development. This is the first
first State
State General Fund allocation
for the MHP program in more
more than
than aa decade. Competitive NOFAs are currently underway.
decade. Competitive

California’s Veterans
California's Veterans Housing and Homelessness Prevention (VHHP) Program (Proposition 41)
voters approved
In 2008, California voters approved Proposition 12, the
Proposition 12, the Veteran’s
Veteran's Bond Act of of 2008,
2008, authorizing
authorizing $900
million in general obligation bonds intended to help veterans purchase homes through the CalVet
Cal Vet Home
Loan Program.
Program. As
As a result of the nation’s economic crisis and the state's
nation's economic state’s housing
housing downturn,
downturn, the CalVet
Cal Vet
Home Loan Program did not experience the demand that was originally projected before the downturn.

In 2013, AB 639 restructured the Veteran’s Bond Act
Veteran's Bond Act of
of 2008 authorizing $600 million in in existing
existing bond
authority to fund
authority fund acquisition,
acquisition, construction,
construction, rehabilitation
rehabilitation and preservation
preservation of multifamily housing for
veterans and
veterans and their families. With
their families. With the approval of Proposition
the approval Proposition 4141 by California
California voters 2014, the
voters in 2014, the
California Department of Housing and Community Development (HCD), in collaboration with CalHFA CalHFA
and CalVet, adopted and released its final
final program
program guidelines
guidelines for
for the
the VHHP
VHHP Program
Program early
early this
this year.
year. The
Availability (NOFA)
second Notice of Funding Availability (NOFA) was issued by the state
was issued state departments
departments in October
October 2015,
2015,
providing an additional $75 million to serve veterans (the initial VHHP NOFA was issued in March 2015
million).88
for $75 million).

Los Angeles County
In Los Angeles County, in fiscal year 2013-2014, the Board of Supervisors made a five-year commitment
of $75 million in former tax increment
increment funding;
funding; $15
$15 million
million per
per year. issued to
year. Annual NOFAs will be issued
award funds. A A recent
recent addition
addition of
of$9.9
$9.9 million
million to
to the
the upcoming Fall 2015 NOFA - initially funded at $15
million - sets the new total at nearly $25
$25 million
million for this year in
in fonner
former redevelopment
redevelopment funds for affordable
housing development.

METRO Motion
In the summer of 2015, the LosLos Angeles
Angeles Metropolitan
Metropolitan Transportation Authority (MTA) approved a Mayor
Garcetti led Motion that directs the MTA to set a 35 35 percent
percent affordable housing goal of all residential units
developed on
developed on MTA-owned
MTA-owned property. The Motion
property. The Motion further
further directs the MTA
MTA to create
create aa Transit-Oriented
Transit-Oriented
Affordable Housing Fund (TOAH)
(TOAH) with
with an initial dedication
dedication of $2
$2 million
million each
each year for five years for a
million maximum.
$10 million However, other
maximum. However, other provisions
provisions include
include a price
price reduction
reduction on MTA-owned
MTA-owned land for
affordable housing
affordable housing projects
projects as well as the establishment
establishment of a memorandum of of understanding with local
local
jurisdictions
jurisdictions for
for joint
joint development
development projects. Additionally, this
projects. Additionally, this TOAH fund will likely
likely bebe acquisition
acquisition
financing that
that does
does not include
include the
the capital
capital leveraging
leveraging sources. This significant
sources. This significant policy shift
shift underscores
underscores
the need to address the affordable housing crisis and to better serve a primarily low-income ridership.

8 "Veteran"
8
M Veteran” means any
any person who served in the active military, naval or air service of the United States or as a
member of of the National guard who was called to and released from active duty or active services for a period of
not less than 90 consecutive days or was discharged from service due to a service related disability. This includes
veterans with other-than-honorable discharges.
Benefit Fee
New Affordable Housing Benefit Fee Study
Page 11
11

Speaker Atkins
Atkins'’ Housing Bills Package
Speaker Atkins’
Atkins' proposed
proposed bills
bills (AB
(AB 1335,
1335, ABAB 35,
35, AB 90, and AB 1056) 1056) were a comprehensive approach
to increasing the availability of affordable housing
housing statewide.
statewide. The
The bills proposed
proposed to establish a permanent
affordable housing funding
affordable housing funding source
source through
through aa $75
$75 fee
fee on real estate transaction documents
documents with
with a cap
cap of
$225 per parcel (AB 1335), increase the state’s
state's Low Income Housing Tax Credit by $300 million thereby
enabling a $200 million leverage in 4 percent
percent federal
federal credits
credits that
that are
are currently
currently underutilized
underutilized (AB35), create
a framework
framework for how California will spend the NHTF funds mentioned above above (AB
(AB 90) and dedicate a
portion
portion of the Proposition
Proposition 47 funds
funds to
to reduce
reduce recidivism
recidivism by investing
investing inin rapid
rapid rehousing
rehousing and
and support
support
systems
systems for formerly incarcerated
incarcerated Californians
Californians (AB (AB 1056).
1056). Governor
Governor Brown
Brown vetoed AB35 citing future
financial uncertainties regarding the State’s
State's budget and signed both AB AB 90
90 and AB
AB 1056.
1056. Meanwhile, the
California State Legislature made AB 1335 1335 a two-year bill that may be advanced in 2016.

DEPARTMENT RECOMMENDATION
Based on the review of
of possible local funding programs, new state resources and a survey of other cities
with similar housing challenges, the HCIDLA recommends the Affordable Housing Benefit Benefit Fee as a local
economic tool to serve as the City's
economic tool City’s first
first dedication
dedication of
oflocal
local and
and permanent
permanent affordable
affordable housing funding.
funding.
HCIDLA further recommends to jointly work with the Department of of City Planning on the administration
of
of the new study.

HCIDLA is not recommending
recommending thatthat the City pursue a housing bond and a tax levy since they would require
an extensive public campaign with significant financial and staff staff resources without assurances ofof approval
after the time and monetary investments
investments areare made.
made. The
The supermajority
supermajority voter approval required for a tax
levy or bond isis a very high
high threshold
threshold intended
intended to
tonot
not allow
allowtax
taxincreases
increasestotohappen
happeneasily.
easily. What’s
What's more,
both are finite resources
resources eventually leaving
leaving the
the City
City without
without aa local
local permanent
permanent funding
funding source.
source. With an
Affordable Housing Benefit Fee program, however, the City Council and the Mayor control the program
design, including fee
design, including fee levels, exemptions and
levels, exemptions and adjustments
adjustments that
that may
may correspond
correspond with
with the
the City’s
City's overall
overall
economic wellbeing.

Is it the right time?
Los Angeles' improving
Los Angeles’ improving economy
economy presents a tremendous opportunity for the City to to dedicate
dedicate financial
financial
resources to this worsening problem and enable prudent long-term affordable housing plans in opportune
areas type most needed.
areas and for the housing type needed. Affordable
Affordable housing
housing construction
construction is
is aa significant
significant economic
economic
engine in the City
City of
of Los
Los Angeles
Angeles generating
generatingjobs,
jobs, taxes
taxes and
andincome.
income. The AHTF projects produced nearly
972 jobs
jobs in 2014 alone.
alone. The
The Affordable Housing Trust Fund awarded $28.1 million in calendar year 2014
leveraging $87.3
$87.3 million in other financial resources to finance 367 affordable housing units representing
a total development cost of $115.3
$ 115.3 million.

The Affordable Housing Benefit Fee program is designed to offset a portion of of the future impacts on the
City's
City’s affordable
affordable housing and it is is not
not considered
considered an in-lieu fee oror payment required in-lieu of of building
low-income housing
housing units.
units. Nexus
Nexus studies
studies quantify
quantify the maximum justifiable linkage fee a City may levy.
However, jurisdictions
jurisdictions do not typically adopt fees at the maximum level since they must strive to achieve
a balance between a fee that is
balance between is aasignificant
significant contributor
contributor to new
new affordable
affordable housing
housing and
and still
still promotes
promotes
economic activity through continued development
development activity.
activity. Failure to pay the fee exacerbates the housing
crisis and affects local businesses in the form of loss demand for goods and services.
Affordable
New A Benefit Fee Study
ffordable Housing Benefit
Page 12

Missed Opportunity
During the housing boom and the recent growth in overall construction activity, the City of of Los
Los Angeles
missed a tremendous opportunity to increase the affordable housing stock through an Affordable Housing
Benefit Fee
Fee program.
program. IfIfan
an affordable
affordable housing
housing benefit
benefit fee,
fee, even
even at
at the
the lowest
lowest level
level studied
studied in in 2011, were
implemented
implemented in in 2011,
2011, the
the AHTF
AHTF would have received
would have received an average
average of
of $37
$37 million
million in in annual
annual revenue,
revenue,
enabling the
the City to
to finance 370 affordable
affordable housing
housing units
units every
every year.
year. At
At this
this rate,
rate, aa linkage
linkage fee
fee program
program
would double the amount of of affordable housing the City can finance from 367 with current federal funds
to over 700
700 units
units annually with linkage fee proceeds included.
included. The losses are magnified when we consider
the leveraged dollars that are missed when the City does not invest in affordable housing.

Self-Sustaining City
An overdependence on short-term state and federal funds funds hampers
hampers the City’s
City's ability
ability to create
create long-term,
long-term,
innovative housingpolicies.
innovative housing policies. The
The Affordable
Affordable Housing
Housing Benefit
Benefit Fee grants the City City the
the autonomy
autonomy andand
flexibility to develop
flexibility to develop housing
housing policy
policy objectives
objectivesand andnewnew financing
financingtools
tools that
that are
are based
based onon a local
local
understanding
understanding of of the
the problem.
problem. With
With aa benefit
benefit fee,
fee, the
the City
City would
would have
have the
the distinct
distinct opportunity
opportunity to use
funds in areas that do not qualify for other state and federal dollars because of of strict
strict regulations, such as
locating housing within a one half mile of light light or
or heavy
heavy rail.
rail. Similarly, the City could help middle income
households
households whowho dodo not qualify
qualify for
for low-income
low-income housing
housing assistance
assistance financed
financed by federal
federal resources
resources but
nevertheless
nevertheless struggle to to find market rate rents
rents they can
can afford.
afford. These
These households
households fallfall into
into what is known
as the "donut hole" earning too much to qualify for existing program but not enough to afford market rate
“donut hole”
costs. These
These type
type ofofflexible
flexible uses
uses only
only come
come with
with aa locally
locally generated funding stream.

California Cities with Housing Linkage and/or Impact Fees
In the last year alone,
alone, housing
housing linkage
linkage and/or
and/or impact feesfees have
have made
made headlines
headlines inin expensive,
expensive, built-out
built-out
cities.
cities. In
In light
light of
ofsevere
severe funding
funding cuts
cuts and
and strong
strong real
real estate
estate markets
markets driven
driven by
by high-end
high-end housing,
housing, many
cities
cities are actively
actively enacting
enacting new housing
housing impact
impact fees or revising
revising existing
existing programs
programs to increase
increase local
local
revenue
revenue and and create
create affordable
affordable housing
housingopportunity.
opportunity. In In cities
cities where
where the
the linkage
linkage feefee proposal
proposal was
was
controversial,
controversial, bothboth city
city officials and the
the development
development community
community made
made compromises;
compromises; acceptable
acceptable fee
fee
levels
levels or fee increases as well well as
as decisions
decisions about
about development
development types subject to the fees fees were
were achieved
achieved
through consultations with all stakeholders. Some Some ofofthe fastest growing cities listed below chose housing
linkage fees
fees as a necessary program to ensure that affordable housing is built.

■ The City of
ofSan Francisco has one of the more progressive linkage fee programs in the state.
Developers must pay $24.03 per square foot of of office space, while retail and entertainment pays
$22.42 per square foot, among other fees.fees. The
The city
city uses the percent
percent change
change in the Construction
Cost Index to adjust the fees annually.

■ The City of
of West
West Hollywood completed a study in 2015 recommending a fee increase on
commercial development from $2.85 per square foot to $8 per square foot.

■ Daly City adopted a housing impact fee in April 2014 that ranges between $14 and $25 per square
foot of rental and for-sale units.

■ The City
City of Diego, after aa protracted
of San Diego, protracted battle
battle between
between City
City Council
Council and
and the
the development
development
community throughout 2014,
community throughout 2014, the
the City
City approved
approved doubling
doubling the
the existing
existing fees
fees by 2017; fees
fees were
were
unchanged since 1996.
unchanged since 1996. New
New office
office space
space paid
paid $1.06
$1.06 per
per square
square foot
foot and
and under
under the
the new
new proposal
proposal
the fee will be $2.12.
$2.12. Likewise,
Likewise, hotels
hotels and
and retail
retail space
space paid 6464 cents
cents per
per square
square foot and will pay
$1.28 per square foot.

■ The City
City of
of San Jose, in November
San Jose, November 2014,2014, approved
approved aa new housing
housing impact
impact fee
fee program
program that
that
establishes a fee of
of $17 per square foot of of new development on all new market-rate housing.
Affordable Housing
New Affordable Housing Benefit
Benefit Fee
Fee Study
Page 13


■ The City ofof Mountain View
View more than doubled
doubled the existing impact fee program of of $10.26
$10.26 per
square foot to $25 per square
square square foot
foot for
for office
office space
space and
and $17
$17 per square
square foot
foot for
for new
new apartment
apartment
projects,
projects, These
These fee
fee increases
increases are
are well
well above
above the
the staff
staff recommendation
recommendation of of $15
$15 per square
sauare foot of
apartment space and $20 per square foot of of office space.

■ In San
San Mateo
Mateo County,
County, thirteen
thirteen cities
cities partnered
partneredtoto explore
explorethe
the use
use of impact
impact fees
fees on
on new
new
development to fund affordable housing. This This multicity
multicity project will simultaneously
simultaneously produce nexus
studies for several jurisdictions in the county; the results are expected in 2015.

Much like Los Angeles, these cities are experiencing
experiencing an affordable housing crisis, however, at the same
time they expect to
to continue
continue attracting
attracting significant
significant development
development in in the
the future.
future. They
They are
are taking
taking proactive
steps to spread the economic prosperity to all residents
residents (see
(see Attachment
Attachment 2). 2). The
The City
City of
of Los
Los Angeles can
join other forward thinking cities by implementing its own Affordable Housing Benefit Fee program.

Social Contract
An
An Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee program
program calls
calls for the
the development
development community
community to embrace
embrace the
the
responsibility of
responsibility of financing
financing a supply of of affordable
affordable housing
housing forfor the
the growing
growing low-and
low-and moderate-income
moderate-income
workforce that isis employed.
workforce that employed. GivenGiventhe
thehigh
highpropensity
propensity for
for developers
developers toto profit
profit from
from Los
Los Angeles'
Angeles’
popularity
popularity and
and standing
standing as as the third largest metropolitan
metropolitan economy
economy in in the
the world as well as the massive
massive
public
public investment
investment in in transportation
transportation infrastructure,
infrastructure,the
the fee
fee program
program isis aa fair and
and positive
positive step
step toward
toward
equitable growth that spreads economic opportunity to working households.

An Affordable
Affordable Housing
Housing Benefit
Benefit Fee
Fee program
program relies
relies entirely
entirely on on the
the City’s
City's ability
ability to
to continue
continue attracting
attracting
development and its ability to encourage expansion within the City so continued job growth is critical for
the success of the program.
program. IfIfstructured
structured correctly,
correctly, the
the fee
fee program
program will help sustain
sustain job growth
growth and
and will
help
help pay
pay for
for the
the much
muchneeded
neededaffordable
affordable housing
housing of ofitsitsworkforce
workforcewhile
whilepromoting
promoting economic
economic
competitiveness. The
The slightly
slightlyhigher
higherdevelopment
development costs
costs expected
expected fromfrom a housing
housing linkage
linkage fee program are
offset by higher rents and sales prices in a high demand market like Los Angeles.

CONCLUSION
While housing linkage fees are not a panacea for cities with an affordable housing crisis, they do generate
millions
millions of dollars and help leverage additional funds that together make a significant
significant contribution to a
local
local fund.
fund. Of
Ofthe
thehigh
highcost
costcities
citiessurveyed
surveyed asas part
part of
ofthis
thisreport,
report, San
SanFrancisco
Francisco and
and Boston
Boston have
have
implemented housing linkage fees for several years.
years. Combined
Combined withwith other
other state, federal and private funds,
the housing linkage fee programs share the costs of new affordable housing demand over several funders,
not just developers.
developers. According
According toto the
the prior
prior 2011
2011 Affordable
Affordable Housing
Housing Benefit Fee study,
study, in cities
cities that
that
implement this
this type
type of fee program,
program, the linkage fees
fees account for approximately 20 to 25 percent of of the
local housing budget.

Support and need for a City Affordable Housing Benefit Fee program has been long established in
Los
Los Angeles
Angeles with
with Mayor
Mayor Tom
Tom Bradley
Bradley proposing
proposing the
the City’s
City's first
first linkage
linkage fee in 1990
1990 with
with an
an adopted
adopted
"notice
“notice to credit"
credit” ordinance
ordinance notifying developers
developers that
that they might be subject to an an Affordable
Affordable Housing
Housing
Mitigation
Mitigation Fee
Fee that
that the
the City
City was
was considering.
considering. Nearly a decade later, in 2000, the City's
City’s Housing
Housing Crisis
Crisis
Task Force issued a set ofof recommendations through the In Short Supply report calling for a linkage fee
as one of many City taxes
taxes to help finance
finance affordable
affordable housing.
housing. Today, fifteen
fifteen years later, the City faces a
more pronounced and complex housing shortage that demands the City to consider the establishment of of a
local permanent,
permanent, self-sustaining source
source of funding
funding that gives
gives the City flexibility to create new financing
tools to address the affordability crisis.
New Affordable Housing
New Affordable HousingBenefit
BenefitFee
Fee Study
Study
Page
Page 14
14

FISCAL IMPACT
The department is requesting up to $500,000 to be transferred to the Department of
of City Planning
Planning for
executing the contract for the new study.

Prepared by: Reviewed by:

MARISOL ROMERO CLAUDIA MONTERkosX
MONTER
Housing, Planning and Economic Analyst Director, Public Policy and Research
Research Unit
Unit

Reviewed by:
by: Reviewed by:

f i

EDWIN GIPSON N LAURA K. GUGLIELM!
Director, Strategic Planning and Policy Division Executive Officer

Approved by:

zAm
RUgHMORE
RUSHMORE D. D.
Uji
RVANTES^
Qer ANTE
p
General Manager *
1
Attachment 1

Los Angeles'
Los Angeles' Rent
Rent and Mortgage
Mortgage Affordability
Affordability Gaps

■ Los
Los Angeles'
Median
Income
Median
$160,000 Home
Price
$140,000 ■ Income
$560,000
Needed to
Afford a
$120,000
Mortgage

$100,000
$100,000 Income
Needed to
$80,000 Afford Rent

$60,000
Income
$40,000 Needed to
Afford a
$20,000
$20,000 Built
Newly Built
Apt

$0 11 / 11 gl 111 or,
2007 2008
2007 2008 2009
2009 2010
2010 2011
2011 2012
2012 2013
2013 2014
2014
Attachment22 -Linkage
Attachment -Linkage Fees
Fees in Select
Select California
California Cities (Per Square Foot)
Cities (Per
Warehouse/ Retail/ integrated
Integrated Small
City Hotels R&D Office Entertainment Residential
Industrial
Industrial Restaurant PDR Enterprise

Menlo Park
Menlo Park $15.19 $8.24
(2014)

Napa County
$9.00 $5.25 $3.60/$4.5D
$3.60/$4.50 $7.50 $5.50
(2015)

Palo Alto
$18.89 $18.89 $18.89 $18.89 $18.89
(2014)

Marin
Mann $1,745 per
$7.19 $7.19 $1.94/$3.74 $5.40
(2013) room

Mountain View
$25.00 $17.00
(2014)

San Francisco
$17.99 $16.01
$16.01 $24.03 $22.42 $22.42 $18.89 $18.89
(2015)

(2017)
San Diego (2017) $1.28 $0.80 $2.12 $1.28

(2014)
San Jose (2014) $17.00

(2014)
Daly City (2014) $25.00