Council reviews nexus study on affordable‑housing fees; staff recommends policy options including higher rental threshold and CPI indexing

City staff and consultants presented an affordable‑housing impact‑fee nexus study to the Cotati City Council on May 26.

The consultants (Carlos and James from Willan) said the study modeled rental and for‑sale prototypes, used local project cost data from Sagio Hills and South Park Commons, and applied implan economic outputs to estimate financing gaps. The report’s average construction cost for an affordable development was about $822,000 per unit. Using prototype models, consultants estimated an average financing gap of roughly $177,000–$178,000 per rental unit (about $197 per square foot) and about $319,000 per for‑sale unit (about $193 per square foot).

Staff framed the program as two interrelated tools: an inclusionary approach that applies to residential development (with a current one‑to‑nine unit fee option and a 15% inclusionary requirement for larger projects) and commercial linkage fees that apply to new non‑residential development. Consultants reported proposed maximum linkage fees at roughly $81/sq ft for retail, $83/sq ft for office and $37/sq ft for industrial (study maximums; staff will recommend final rates later).

Policy suggestions discussed with the council included: - Keeping the nine‑unit threshold for for‑sale inclusionary requirements but considering raising the rental threshold to 20 units before requiring on‑site affordable rental construction, based on smaller developers’ capacity to operate long‑term rental projects; - Moving to a per‑square‑foot fee structure to improve transparency and comparability across jurisdictions; - Allowing fractional units to fee out (rather than rounding up to require an additional in‑project unit); - Considering automatic CPI adjustments to limit future periodic large rate shocks; and - Reconsidering commercial/office linkage fees (staff suggested eliminating or lowering those fees and potentially keeping a lower industrial fee, because the city sees limited new commercial square footage).

Council members probed whether fees deter development and asked for a fuller accounting of total fee burdens (school, fire district, other jurisdictions’ charges) before adopting policy changes. Several councilmembers said they preferred keeping some fee on small one‑to‑four unit developments rather than fully exempting them. Council members also emphasized that alternative methods to on‑site inclusionary units (land donation, off‑site construction, funding housing‑element programs) should provide value equivalent to the cost of constructing units; staff and council repeatedly cited the study’s $822,000 per‑unit cost as a benchmark for equivalency.

No action was taken; staff will return with fee illustrations that combine the affordable‑housing fees with other local fees to show total project fee burdens and a more concrete recommendation.

Representative quotes from the discussion include Council member Ford: "Recovering such a small fraction of the need or impact is a hard pill to swallow," and from staff: detailed modeling shows a per‑unit financing gap and suggested policy tradeoffs.