Laserfiche WebLink
7.A. - Page 4 <br /> Commercial Nexus Studies. A summary of the steps is shown in Figure 2; however, the <br /> steps vary slightly between the commercial and residential studies. <br /> FIGURE 2: NEXUS STUDY METHODOLOGY (GENERALIZED) <br /> 1. Estimate demand for 2. Estimate demand for <br /> workers of various wage affordable housing from new <br /> levels created by typical <br /> development. worker households. <br /> 4. Using the gap, calculate 3. Determine the gap between <br /> the maximum fee for worker's ability to pay and <br /> different development market rents. <br /> types. <br /> Impact fees lessen the impact of new individual development projects; they do not <br /> address existing or longstanding affordable housing issues outside of a particular <br /> development. As the fee is based on the additional low-income workers needed by new <br /> residents and employees, the funds are to be used on workforce housing. <br /> Common Concerns with Affordable Housing Fees: There are two common concerns <br /> with adopting affordable housing impact fees: <br /> 1. The fee cost will be passed on to residents, raising rents and sales prices. <br /> 2. The fee will discourage new development by making new construction too <br /> expensive. <br /> One concern is that the fee cost will be passed on to market-rate residents in the form <br /> of higher rents or sales prices, undercutting the purpose of the fee. Staff reviewed this <br /> concern with consultants assisting with the nexus study. The consultants provided <br /> information that in a competitive real estate environment affordable housing impact fees <br /> do not raise housing prices. The overall market sets the rental or sales price and <br /> developers cannot raise prices even if their costs go up, regardless of the reason. <br /> Inversely, if development costs go down, rent or sales prices do not generally drop <br /> below the market rate. Increased development cost typically results in lower land prices <br /> as opposed to a higher market rent or sales price. For this reason, the feasibility <br /> analysis is crucial to setting a fee level that does not inhibit new construction and <br /> economic development, (i.e. that developers can still profitably buy land), and ideally is <br /> somewhat in line with surrounding cities. <br /> This feasibility analysis was incorporated into the Redwood City Nexus Studies. While <br /> the actual nexus analysis establishes the maximum legally-justified fee, the feasibility <br />