Lakewood Council reviews inclusionary housing proposal; staff recommends nexus study before implementation

Lakewood City Council on Nov. 3 heard a staff presentation on a proposed mandatory inclusionary housing ordinance and was told a formal nexus study is needed before any requirement would take effect.

Housing Manager Chris Connor told the council that housing cost burdens in Lakewood have increased sharply, from about 30% in 2000 to more than 52% in the 2022 American Community Survey, and that the city’s largest need is deeply affordable rental housing. “Is it the juice worth the squeeze?” Connor asked, summarizing the consultants’ feasibility testing on proposed set‑aside and fee options.

Connor said consultants prototyped three development scenarios — a 19‑unit for‑sale townhome product, a roughly 135‑unit three‑story rental and a roughly 280‑unit five‑story rental — and modeled 5% and 10% set‑aside requirements plus fee‑in‑lieu alternatives. The analysis found a feasible baseline for townhomes but not for the larger rental prototypes under current market assumptions. Fee waivers and gap funding, particularly waiving parkland dedication and other development fees, were shown to materially improve feasibility in many scenarios.

The Housing Policy Commission and staff recommended that city staff draft ordinance language and that council commission a formal nexus study to test legal and financial assumptions before implementation. As described to council, draft parameters under consideration include a 5% initial set‑aside that could escalate to about 8% over time, an applicability threshold that would kick in for developments larger than four units, and a fee‑in‑lieu alternative whose schedule would be informed by the nexus study. Connor noted a draft rental affordability target of 80% area median income in the current request, but also pointed out that Lakewood’s Proposition 123 uses a 60% AMI ceiling for rental affordability and that the nexus study would be used to reconcile legal and policy targets.

Councilors asked about legal risk after learning that some peer cities face litigation over similar ordinances; Connor said the city attorney is monitoring those cases. Councilors also pressed staff on what fee‑in‑lieu revenue would be used for; HPC members and staff said possible uses include land banking, gap financing for new affordable units and preservation or subsidy of deed‑restricted units, but they cautioned that early revenue from a new ordinance could be modest and would likely need to be paired with other dedicated funding sources to make significant impact.

On timing and procurement, staff said they have not yet issued a solicitation for the nexus study and that the city would need to identify a funding source or bring forward a special appropriation if the work is not already budgeted. Several council members urged staff to use existing reserves or identify a budget path quickly so procurement can begin; staff said they will return with funding options and next steps. No council vote or ordinance adoption took place at the study session.

The council directed no immediate action at the meeting; Connor said staff would coordinate with the city manager and return to council with procurement and budget recommendations for the nexus study and for drafting ordinance language.