Laguna Woods sets rental inclusionary in-lieu fee at $642 per affordable square foot

The Laguna Woods City Council adopted a resolution establishing an in-lieu fee for rental developments that choose not to build required affordable units on-site under the city27s inclusionary housing ordinance. Staff and the council said the fee is intended to satisfy state law that requires alternatives for rental projects, and to provide a funding mechanism the city could use to support off-site affordable housing in the future.

City staff explained the mechanics and rationale: "The in-lieu fee that's proposed in the agenda materials is $642 per affordable square foot," staff said. The staff report explained that the figure equates approximately to $32.12 per market-rate square foot and is intended to approximate the cost of constructing an on-site affordable unit; the city retained Economic and Planning Systems, Inc. to calculate the amount.

Why it matters: state law requires local governments that have inclusionary requirements for rental projects to offer alternatives, including in-lieu fees. Staff said the city27s ordinance (Chapter 13.25 of the Laguna Woods Municipal Code) already contemplated a future fee and authorized a resolution to adopt one. The fee will only apply if a future rental project opts to pay rather than build on-site units. "A developer could choose to build affordable housing on-site. They can choose to pay this fee or they can choose one of the other alternatives that are included in the ordinance," staff said.

Public comments and concerns Residents and attendees raised process and transparency concerns during the public hearing. Georgiana Willis asked the council to table the resolution until the public received parcel-level zoning details, CEQA materials and a list of affected properties; Darlene Backus repeated that request and said county records raised "red flags." City staff and the city attorney replied that the fee adoption is not a rezoning; the zoning actions for housing-element compliance had already been completed in 2023 and the related environmental review was available on the city website.

Council action and next steps Following the public hearing and staff responses, the council voted to adopt the resolution creating the in-lieu fee and staff said it will bring ordinance amendments and administrative rules to clarify fee calculations and to periodically update the fee (staff suggested annual review) to keep pace with market changes. The city emphasized it is unlikely to build housing itself and would likely hold in-lieu fees in a trust fund and contribute them to affordable-housing projects developed by others.

Details and context - The inclusionary ordinance is codified at Laguna Woods Municipal Code Chapter 13.25; staff said the ordinance was adopted in 2024 and contemplates an in-lieu mechanism. - The city identified 17 potential housing sites outside Laguna Woods Village as part of its recent RHNA (Regional Housing Needs Allocation) compliance work and emphasized that Golden Rain Foundation, the mutuals and towers were not selected for those sites. - Staff received two pre-meeting communications: a letter from the Building Industry Association (Orange County chapter) objecting to inclusionary ordinances and a resident letter raising questions; staff responded to those questions in advance.