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Council adopts lower ownership in‑lieu fee, holds rental in‑lieu fee at prior level after debate
Summary
Housing staff proposed FY25/26 in‑lieu fees; ownership in‑lieu decreased slightly to $268,800 per unit under the recommended methodology while the rental in‑lieu fee rose to $306,100 per unit (driven by the construction cost index). After public comment and debate, the council ultimately approved a motion to adopt the lower ownership fee while leaving the rental fee at the previous year’s level and directed staff to amend the resolution to make the effective date immediate.
Housing project manager Yahaira Morales presented the annual inclusionary in‑lieu update and explained the methodology used to derive ownership and rental in‑lieu amounts for FY25/26. Morales reminded council that the inclusionary ordinance requires on‑site set‑asides at a 20 percent baseline for ownership, and explained alternative compliance options (off‑site units or in‑lieu payments) require council approval.
Under staff methodology — which uses multi‑year averages and a construction cost index (CCI) for rental units — staff proposed the ownership in‑lieu fee decrease moderately to $268,800 per unit (from $273,400 previously) and the rental in‑lieu fee increase to $306,100 per unit, reflecting construction cost escalation. Yahaira noted a county nexus study is underway and that staff would post methodology tables and final guidelines on the city website.
Public commenters, including a development representative, urged council not to increase developer costs because higher fees reduce project feasibility. One developer urged the council to reject increases in rental fees. Council debated whether it was prudent to change fees before the larger nexus study is completed; after an initial motion failed, the council later passed a motion to adopt the lower ownership in‑lieu fee while leaving the rental fee at the prior year level. Staff said they will modify the resolution to make the effective date immediate and will incorporate responses to public letters in the record.
What’s next: staff will post the updated guidelines and amended resolution language reflecting immediate effect and will incorporate information from the forthcoming Grand Nexus study when available.
