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<br /> <br /> <br />4 <br /> <br />inclusionary requirement. One way to measure this is the point of indifference or the dollar amount <br />where a developer makes the same return by paying the fee versus providing the units. <br />For the modeled rental development with a 15% Very Low Income requirement, the point of <br />indifference is approximately $425,000 per affordable unit or $51,000 per market rate unit. <br />However, the calculations are a little more complicated. Most developers will actually pay more than the <br />point of indifference, because they would prefer not to administer the affordable units. On the other <br />hand, developers would eliminate their density bonus units if they provided the fee. If a developer were <br />fully using the density bonus, one would expect them to be less interested in paying the in lieu fee, <br />which is reflected in a lower point of indifference, $62,000 per affordable unit. <br />Most cities want to ensure that if they receive in lieu fees they can afford to build affordable units. Every <br />development is different, but in recent years cities in San Mateo County, the local match (or amount <br />that cities need to contribute to make an affordable developments happen) is approximately $65,000 <br />per affordable unit (Source: San Mateo County Department of Housing personal communication). <br />Fractional Units <br />Often the affordable requirement does not come out to a whole number, e.g. 10.3 units. Some cities <br />round to the closest whole number. This can lead to developers adjusting their proposals to try to have <br />their obligation round down to the lower number. An alternative is to give the developer the option to <br />round up to the nearest whole number or pay a prorated portion of the in lieu fee. For example, if they <br />were responsible for 10.3 affordable units, they could either provide 11 units or 10 units plus pay 0.3 <br />times the in lieu fee for one unit. <br />Small Apartments <br />Small rental developments are not currently feasible in Redwood City. This is because small <br />condominium (ownership) projects are more profitable and therefore developers of this product can <br />pay more for land. <br />Additionally, it can be challenging for a city to work with owners to manage one or two affordable units. <br />Many cities prefer to have small developers pay a fee instead. <br />It is recommended that Redwood City continue to apply its impact fee on developments less than 20 <br />units. <br />Ownership <br />The consulting team modeled a 15 unit condominium townhome development on 0.5 acres, similar to <br />what might be built in Redwood City. Construction cost would be approximately $13.97 million. <br />Details are summarized below. <br /> Unit Type Number in <br />development <br />Square Footage Sale price <br />2 Bedroom 7 1,400 $1.16 M <br />3 Bedroom 8 1,600 $1.36 M <br /> <br />7.A. - Page 52