Agda Pkt 2026.07.07 Special Council Meeting

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REDWOOD CITY FAIR AND AFFORDABLE HOUSING ORDINANCE Economic & Planning Systems, Inc. 34 Affordable Housing Impacts Overall, the impact of additional fees, compliance costs, relocation obligations, or constrained rent growth is not limited to one line item. These costs move through the project’s financing “waterfall” and may reduce public loan repayment, weaken reserve funding, reduce resident services, defer maintenance, and increase the likelihood that additional public subsidy will be needed to preserve the property over time. Illustrative Affordable Housing Cash-Flow Analysis As part of this study, EPS has prepared an illustrative development and operating cash-flow analysis demonstrating how new fees and constrained rent growth could affect the financial viability of a 100 percent affordable Low Income Tax Credit (LITC) project over time. While the analysis simulates the cash-flow of a hypothetical 101- unit affordable housing project (that includes one manager unit) under three scenarios, the assumptions and methodology have been informed by financial documentation from real Redwood City projects. The scenarios are designed to illustrate the potential financial impact of the proposed Ordinance, as follows: • Scenario 1: Baseline / No Costs Related to Ordinance: This scenario is designed to reflect the cash-flow of a financially viable affordable housing project that could realistically be underwritten in the current regulatory environment. It assumes the project is not subject to the rent control provisions or administrative fees imposed by the proposed Ordinance (see calculations in Chapter 5). Rent growth is assumed to grow at 2.5 percent annually, consistent with assumptions affordable housing developers typically use to underwrite projects 27. Meanwhile, operating expenses are assumed to grow at 3.5 percent annually, generally consistent with CPI and typical operating cost escalation assumptions in all three scenarios. • Scenario 2: Proposed Ordinance’s Impact on Post-1995 Affordable Housing Project: This scenario assumes the project is exempt from local rent stabilization under Costa-Hawkins because it was built after 1995. However, the project is subject to new cost burdens, including the proposed Ordinance’s administration fee 28. Rental revenue is assumed to grow at 2.5 percent annually, and operating cost at 3.5 percent annually, consistent with the baseline scenario. 27 The State Tenant Protection Act exempts deed-restricted affordable housing however, as of 2025, state law now requires tax credit projects to enforce a rent cap of 5% + CPI or 10%, whichever is lower, if the area median income is rising faster than this cap. 28 The proposed Ordinance administration fee is assumed to be $471 per unit annually, which reflects the midpoint estimate for ongoing administration costs only and does not include interfund loan repayment or operating reserve contributions, as described further in Chapter 5. The proposed Ordinance refers to a tiered fee system, with a higher fee for fully covered units than partially covered units. For illustrative purposes, this case study does not apply tiered fees and instead uses the midpoint administration fee for both the post-1995 and pre-1995 scenarios. 8.A. - Page 93 of 168 103