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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.


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

Keyser Marston Associates 4December 7, 2012

Uniform Community Benefit Requirement

Keyser Marston Associates

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


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


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


Standardized Provision of Community Benefits


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.


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 %


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 %


Case-by-Case Provision of Community Benefits


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


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.


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


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.

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