Santa Fe staff outline how fee-in-lieu option funnels developer cash into affordable-housing trust fund
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Summary
City affordable-housing staff explained the Santa Fe Homes fee-in-lieu program, describing set-asides for new development, how fees are calculated from HUD fair-market rents and how roughly $900,000 from the program flowed into the Affordable Housing Trust Fund in 2025.
Fabiola Chavez, director of Affordable Housing for the city of Santa Fe, on Feb. 5 briefed the Planning Commission on the Santa Fe Homes fee-in-lieu program and how the fees are used to seed the city's Affordable Housing Trust Fund.
Chavez said the program requires homeownership projects to set aside 20% of units and multifamily rental projects to set aside 15% for affordable housing; projects of 10 units or fewer can opt to pay a fee in lieu rather than deliver on-site affordable units. "Last year in 2025, we received approximately 900,000 from the fee in lieu program that went back into the Affordable Housing Trust Fund," Chavez said.
The presentation explained the fee calculation. Staff use HUD's annual fair-market rents to identify the rental gap: the method calculates a base per-unit fee by subtracting average affordable rents from fair-market rents, doubling that base and multiplying by the number of affordable units and 24 months to arrive at the total fee. Chavez illustrated the approach with a hypothetical 90-unit development that generated roughly $425,000 under the department's example calculation and said the city typically collects about one year of cash flow up front.
Commissioners asked how long units must remain restricted; Chavez said single-family set-asides carry a five-year affordability restriction and multifamily set-asides carry a 20-year restriction. Commissioners and staff also discussed how fees and trust-fund dollars are allocated: Chavez said allocation to nonprofits and developers is handled through an annual competitive solicitation (an RFP) for Affordable Housing Trust Fund and Community Development Block Grant awards, with awards often announced in March or April.
Chavez told the commission the housing department is small and relies on the fee-in-lieu and CDBG funding streams; she noted the city's excise (mansion) tax revenue is not yet available for use because of ongoing litigation and that the department hopes to access those funds once legal matters are resolved. She also said staff are contemplating an ordinance change to increase the multifamily set-aside from 15% toward 18% to increase on-site affordable impact, but emphasized that change would require a formal ordinance amendment.
Why it matters: The fee-in-lieu option channels private development dollars into a centralized grant fund that the city competitively re-grants to local affordable-housing providers; the program reduces the practical on-site requirement for some developers while providing the city with cash to underwrite projects and down-payment assistance. The commission heard technical and policy questions about term lengths, allocation processes and the limits on spending tied to ongoing litigation.
Next steps: Chavez and staff will continue program implementation and the commission may consider ordinance changes if the department pursues a higher set-aside percentage.
