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Tools for Ensuring Equitable Investments - the California ContextTRANSCRIPT
Tools for Ensuring Equitable Urban Investments -
the California Context
Keyser Marston Associates, Inc.Crafting the New Normal Workshop
December 7, 2012
Keyser Marston Associates December 7, 2012
Primary Assumptions A developer will only request an increase in
development scope if it is anticipated to enhance the project economics.
Community Benefits can only effectively only be obtained if an enhancement in value is demonstrated.
Implicitly, value enhancement is split among the developer, the property owner and the community benefit being provided.
Keyser Marston Associates December 7, 2012
Public Benefits Examples Affordable Housing Units: Public Benefit
Cost Equals Affordability Gap Between Market Rate and Affordable Price
Public Parking: Public Benefit Cost Equals Incremental Construction Costs Per Parking Space
Open Space: Public Benefit Cost Equals Appraised Land Value x Land Area Contributed
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Uniform Community Benefit Requirement
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Code applies to the Santa Ana Regional Transportation Center, and provides for:
◦ Broadened commercial and industrial zoning to allow residential uses; and
◦ Development at increased densities.
Housing Opportunities Ordinance (HOO) was enacted with the Transit Zoning Code to assist in meeting RHNA goals.
December 7, 2012
Santa Ana Transit Zoning Code
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HOO imposes affordable housing obligations when:
◦ Commercial or industrial land is converted to residential
◦ Residential density is increased
◦ Percentage of residential development is increased
◦ Rental units are converted to condominium units
December 7, 2012
Community Benefit Triggers
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15% of new residential units must be subject to long-term income and affordability covenants; or
An in-lieu fee can be paid with the fee amount calculated on a project-by-project basis; or
Existing uninhabitable apartments can be acquired and substantially rehabilitated.
December 7, 2012
Affordable Housing Obligations
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Standardized Provision of Community Benefits
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Culver City Mixed-Use Ordinance The Ordinance allows mixed-use
development to obtain density increase in return for provision of community benefits
Value enhancement is calculated using an incremental profit analysis.
The calculation methodology minimizes the number of subjective assumptions.
Keyser Marston Associates December 7, 2012
Calculation Methodology Steps 1-3
Step 1: Identify the Increase in the Number of Dwelling Units
Step 2: Estimate the Market Value per Unit by Appraisal or Market Study
Step 3: Apply an Agreed Upon Threshold Profit %
Keyser Marston Associates December 7, 2012
Analysis Steps 4-5
Step 4: Value Enhancement =
◦ Agreed Upon Profit % x Market Value Per Unit x Number of Additional Units
Step 5: Calculate the Community Benefits Contribution:
◦ Equal to Value Enhancement x Agreed Upon %
Keyser Marston Associates 12December 7, 2012
Case-by-Case Provision of Community Benefits
Keyser Marston Associates December 7, 2012
Santa Monica LUCE The LUCE provides three development
tiers: the Base Zoning (Tier 1) and two discretionary tiers (Tiers 2 and 3).
Tier Height Limit
Community Benefits
Required?1 32 Feet / 2 Stories No2 45 Feet / 4 Stories Yes3 Above 45 Feet Yes
Keyser Marston Associates December 7, 2012
Community Benefits Requirement Based on value enhancement, which is
estimated using a detailed residual land value analysis that compares:
◦ The Base Zoning scenario to the
◦ Proposed development scope.
The benefit to this methodology is that it provides a more precise estimate of value enhancement.
Keyser Marston Associates December 7, 2012
Calculation Methodology Step 1: Estimate the project’s construction
cost
Step 2: Estimate the sales revenue or the capitalized project value.
Step 3: Estimate the residual land value
Step 4: Calculate the value enhancement
Step 5: Identify the amount of the community benefits contribution
Keyser Marston Associates December 7, 2012
Closing Thoughts
Understand your real estate market.
Make planning decisions regarding land use before making fiscal decisions.
Do not over reach on the community benefits requirements.
Create appropriate mechanisms for enacting community benefits requirements.