PLANNING ACADEMY ECONOMIC IMPACTS OF AFFORDABLE HOUSING AND EXTENDED

PERMIT DURATION TO A RESIDENTIAL DEVELOPMENT

OCTOBER 22, 2013JAY HIGGINS, AICP

PERMITTING VARIABLES CAN IMPACT A PROJECT’S FINANCES

• DESIGN – VARIOUS BOARDS OF ARCHITECTURAL REVIEW WILL ASK

• YOU TO … ‘GET YOUR CLIENT’S WALLET OUT’

• DENSITY – QUANTITY DRIVES REVENUE + TRAFFIC, ETC. IMPACTS

• IMPACT FEES CAN BE IN THE +$$$100K PER UNIT

• PERMIT DURATION CAN BE DECADES = +$$$

• AFFORDABLE HOUSING – +$$$...BUILD ON SITE OR PAY FEES?

AFFORDABLE HOUSING

• RELATIVELY UNIFORM REQUIREMENT ON THE SOUTH COAST

• BUILD THEM ON SITE – OR PAY OUT?

• IT DEPENDS … ON THE AMOUNT OF THE FEES PER UNIT OR THE PERCENTAGE REQUIRED TO BE BUILT ON SITE

• IN LIEU FEES CAN RANGE FROM SEVERAL $100K PER UNIT ON THE SOUTH COAST TO JUST UNDER $100K IN THE SANTA MARIA MARKET

• PERCENTAGES OF HOMES THAT NEED TO BE PRICE RESTRICTED – IF THEY ARE GOING TO BE BUILT ON SITE AS A PART OF A DEVELOPMENT PROJECT CAN RANGE FROM 10% - 30% DEPENDING ON LOCATION

SUMMARY

• BUILDING THE AFFORDABLE UNITS ON SITE REALLY IMPACTS REVENUE – EVEN ON THE MARKET RATE UNITS

• DEVELOPERS WILL USUALLY BE OK WITH PAYING THE IN LIEU FEES UP TO THE PER UNIT LOSSES – BUT THAT’S A LEVEL OF FINANCIAL INTIMACY THAT IS UNUSUAL WITH PUBLIC AGENCIES.

• IN ORDER TO MAKE PROJECTS PENCIL THAT HAVE AFFORDABLE UNITS, OTHER FUNDAMENTALS OF THE P&L NEED TO CHANGE – TYPICALLY THESE ARE IN THE FORM OF REDUCED CONSTRUCTION COSTS (AND PROJECT QUALITY) OR DRASTICALLY REDUCED LAND COSTS

• PERMIT DURATIONS THAT MERELY DOUBLE WILL REALLY HURT YOUR ECONOMICS… AND IT DOESN’T TAKE TOO MUCH OF A DELAY (THINK – DECADES) FOR DEVELOPERS TO GO BELLY UP