Sec. 6A-5-20. Possible alternatives to on-site construction of affordable for-sale units.

(a) Possible Sale or Dedication of Land to Affordable Housing Developers.
(1) In a possible alternative to on-site construction of affordable units, the developer may propose to either sell or dedicate sufficient residential lots to a nonprofit developer to satisfy its affordable for-sale housing obligation if, to the city’s satisfaction, it will enable the affordable housing developer to build the for-sale units and sell them at an affordable housing cost to low-income purchasers. Such an alternative proposal shall only be accepted if the community development director determines that the proposal furthers the purpose of this chapter.
(2) At the time of sale or dedication to the affordable housing developer, the residential lots shall be economically feasible to develop, of sufficient size to build the required number of affordable units, and physically suitable for development of the required affordable units. The residential lots shall also have appropriate general plan designation and zoning to accommodate the required number of dwelling units, be fully improved with infrastructure, frontage improvements (i.e., curb, gutter, walk), paved street access, utility (i.e., water, gas, sewer, and electric) service connections stubbed to the property lines, and other such off-site improvements as may be necessary for development of the required affordable units or as required by the city. To exercise this option, the developer shall have a maximum of ninety days from the date that the residential lots are finished with the above improvements to either sell or dedicate the lots to an affordable housing developer.
(b) Land Dedication Option.
(1) If a developer provides substantial evidence to prove that it is not feasible to develop the required affordable units on-site at a residential project, that developer may make an irrevocable offer of sufficient land within the city to satisfy the affordability requirements of this chapter. The dedicated site shall be economically feasible to develop, of sufficient size to build the required number of affordable units, and physically suitable for development of the required affordable units prior to dedication of the land.
(2) The dedicated site shall also have appropriate general plan designation and zoning to accommodate the required number of units, be fully improved with infrastructure, frontage improvements (i.e., curb, gutter, walk), paved street access, utility (i.e., water, gas, sewer, and electric) service connections stubbed to the property lines, and other such off-site improvements as may be necessary for development of the required affordable units or by the city. The city may approve, conditionally approve, or reject such offer of dedication of any specific property. If the city rejects such offer of land dedication, the developer or its designee shall be required to meet the affordable housing obligations by other means set forth in this chapter.
(c) Development of Dedicated Land.
(1) The dedication of land for affordable for-sale lots must result in the development of affordable for-sale units and not multifamily rental units.
(2) Within one year from the date of conveyance of the dedicated land to the city, the city shall determine, at its discretion, whether the dedicated land will be:
(A) Developed by the city to produce the required affordable units; or
(B) Conveyed to an affordable housing developer or other third party who shall enter into an agreement with the city to produce such affordable units.
(d) In-Lieu Fees.
(1) For for-sale residential projects of less than fifty units where the city council determines that it is not feasible or suitable for the for-sale residential project to have on-site affordable units, the city and developer may agree to a contribution of in-lieu fees to satisfy the developer’s affordable housing obligation. Only the city may initiate this in-lieu fee option and only where it is demonstrated based on substantial evidence that there is no feasible alternative.
(2) At the time of tentative map approval, if applicable, the city will provide the developer with an estimate of the in-lieu fees for the residential project. This in-lieu fee calculation at the time of tentative map is only an estimate and is subject to revision and verification at the time of construction, as the estimated sales price of units in the residential project at the tentative map stage may change by the time the project is actually built.
(3) The in-lieu fee for each affordable unit for which the developer is responsible under this provision shall be sufficient to make up the gap between: (i) the affordable purchase price for a low-income household, and (ii) the market value as determined by an appraisal (i.e., the “affordability gap”), plus a fee for administration of the city’s inclusionary housing program. The appraisal shall be completed no earlier than six months prior to the calculation of the in-lieu fee. The administration fee shall be assessed per unit of the residential project, and shall be based on an appropriate percentage of the “affordability gap” for affordable units. The in-lieu fee for a residential project shall be determined using the following methodology:
(A) The market value as determined by an appraisal - (minus) the affordable purchase price of a low-income household for the residential project. This amount determines the “affordability gap.”
(B) Calculate the inclusionary unit amount for the residential project at ten percent of the total (fractions of a whole unit shall be rounded up).
(C) Multiply the “affordability gap” by the number of inclusionary units required for the residential project.
(4) The product of this calculation plus the administration fee per unit equals the in-lieu fee to be charged for the residential project.
(5) An example of an in-lieu fee calculation for a twenty-unit for-sale single-family residential project is as follows:
Market value as determined by an appraisal
=
$250,000
Affordable purchase price for low-income household
=
$150,000
Affordability Gap
=
$100,000
Inclusionary unit requirement
=
2 units (10% of 20 units)
$100,000 Affordability Gap x (times) 2 units
=
$200,000
$200,000 + administrative fee
=
in-lieu fee for the residential project

(6) If the city determines that the developer may contribute in-lieu fees, the developer must pay such fees as a lump sum prior to the issuance of the first building permit for the residential project. No building permit or certificate of occupancy shall be issued by the city until the developer provides written proof of the payment of all in-lieu fees. (Ord. No. 1393, § 3 (part); Ord. No. 1487, § 3 (part).)