Agda Pkt 2026.07.07 Special Council Meeting

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REDWOOD CITY FAIR AND AFFORDABLE HOUSING ORDINANCE Economic & Planning Systems, Inc. 4 Introduction and Summary of Findings 3. The cumulative effect of external factors may amplify overall impacts. While individual requirements may be manageable in isolation, broader conditions outside the proposed Ordinance, including rising utility costs, insurance premium increases, and potential changes to state law such as Costa-Hawkins, could compound financial and operational pressures on property owners and the City, increasing the likelihood of unintended consequences such as deferred maintenance, reduced investment, or challenges in program implementation. Projects may be able to petition for an upward rent adjustment under the proposed Ordinance in order to maintain a fair return. 4. Affordable housing providers may face disproportionate impacts because these properties operate under restricted rents, tight operating margins, and complex regulatory frameworks, limiting their ability to absorb new costs or regulatory burdens. As documented in the initial 9212 Report, deed restricted affordable housing plays an important role in Redwood City’s housing market, accounting for almost 10 percent of all rental units (with pre-1995 buildings accommodating for about 45 percent of the affordable housing stock). Based on an illustrative financial cash-flow analysis, EPS found that the proposed Ordinance could create significant financial challenges for affordable housing operations, particularly for pre-1995 properties subject to both new fees and rent stabilization. The results suggest that if the proposed Ordinance is approved, affordable housing operators / developers in pre-1995 buildings may need additional public subsidies to maintain financial viability and avoid cutting resident services or foregoing critical maintenance and repairs. 5. The proposed Ordinance could create substantial City implementation costs that exceed the stated fee levels. With tenant legal services included, annual ongoing program administration costs are estimated at approximately $5.0 million to $11.1 million, before accounting for one-time start-up cost repayment and establishing an operating reserve. The General Fund may not support ongoing program costs, meaning all expenses would need to be recovered through fees; however, the City could likely front initial start-up costs through an interfund loan 4 that would later be repaid from program revenues, potentially creating financial risk if fee collections fall short. 4 As a reminder, the City's adopted FY 2026–2027 budget includes a projected deficit of more than $12 million. According to staff, there is no guarantee that the City would be able to fully recover all start-up costs associated with implementing the program. Any unrecovered costs would place additional pressure on the City's already constrained financial outlook. 8.A. - Page 63 of 168 73