The fee is based on assumptions related to the types of new jobs projected to be generated by new Commercial development; the number of those jobs likely to pay lower-income wages; the estimated number of households generated by employees in those jobs; and the estimated cost of developing housing units affordable to those employees. These factors vary by the type of Commercial buildings being developed and types of businesses that occupy those buildings. A generic example is provided below:
Calculating the number of households needing affordable housing:
100,000 square feet of new Commercial space ÷ 400 square feet per employee = 250 new employees
250 new employees x 60% earning lower-income wages = 150 lower-income workers
150 lower-income workers ÷ 1.5 workers per household = 100 lower-income households
This number of lower-income households is multiplied by the typical subsidy required to produce affordable housing units to calculate the maximum fee that could be justified through the nexus analysis. The subsidy required is calculated by comparing typical development costs for new housing units in the City to the value of those units when priced at a level affordable to lower-income households.
While the study will calculate the maximum justifiable fee, the City is not required to charge the fee at that level. Through the study process, the City will consider the implications of charging the maximum fee level and whether a lower fee might be charged to ensure that other policy objectives are being met, such as the City’s economic development goals.
EPS is using data from a variety of sources to conduct its analysis. These include:
- Publicly-available data on typical development costs and values for housing units in the City;
- Data from the Bureau of Labor Statistics on average incomes by occupation for the Los Angeles-Long Beach Metropolitan Statistical Area (MSA);
- Data from the California Department of Housing and Community Development on household income tiers; and
- Feedback from City staff and community stakeholders on the above data.