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Council adopts fee-in-lieu formula to enforce housing variety rule for large developments
Summary
Council approved a fee-in-lieu methodology to implement the city's housing-variety requirement for projects of 25 units or more; staff used building-permit valuation data to set a construction-cost-based formula intended to encourage actual provision of diverse unit types.
City Council adopted a resolution on March 20 establishing a fee-in-lieu formula to support the recently adopted housing-variety requirement that applies to projects of 25 units or more.
Community Development Director Hannah Klausman said the fee is calculated from recent building-permit valuation data (a construction-cost proxy set at $418 per square foot), multiplied by the average unit size and the number of unprovided units in the housing-type mix. Staff emphasized the fee is intentionally high to make payment the less-appealing option and encourage developers to supply diverse housing types rather than pay the fee. As an example, staff showed a 40-unit project that would owe roughly $3.76 million to opt out of providing a required 10-unit category; selecting deed-restricted or “resident-occupancy” options reduces the fee by 50'75% depending on the category.
Council asked about periodic review; staff and the city attorney said the fee is a resolution (not an exaction) and recommended annual monitoring and potential adjustment to reflect construction cost changes. Council approved the resolution unanimously.
What happens next: staff said it will monitor outcomes, solicit feedback from developers, and return with any recommended adjustments after one year of application.
