Morgan Hill Municipal Code Ch. 14.08 In-Lieu Housing Fees

A. Need for in-lieu housing fees. The city council has determined, based on the city's general plan including the housing element, and existing statutes and regulations of the state of California, that the in-lieu housing fee is needed in order to finance the preservation of the existing below market rate portfolio, the administration of the housing program, future affordable housing programs and new projects.

B. Consistency with City General, Specific and Master Plans. In establishing the in-lieu housing fee, the city council finds that it is consistent with the city's general plan, including the housing element and applicable specific plans and master plans.

C. The city of Morgan Hill residential development control system ("RDCS") awards competing developments points for construction of very low, low-income, and moderate-income housing or for the contribution of in-lieu housing fees to the housing in-lieu fee fund.

D. Since 1977, the city has amassed one of the largest below market rate ("BMR") property portfolios per capita in the state and established a BMR Program that provides ownership opportunities and affordability to very low, low-income, and moderate-income households.

E. In-lieu housing fees provide for the cost of administering the city's housing program, maintaining the BMR portfolio, as well as the creation and preservation of affordable units, as funding is available.

(Ord. No. 2288 N.S., § 1, 10-24-2018)

A. There is created an in-lieu housing fee for new residential development for residential projects that are required or which volunteer to pay an in-lieu housing fee.

B. For-Sale Residential Projects Outside of Downtown. The in-lieu housing fee for "for-sale" residential projects outside of downtown for which there is a fifteen-percent inclusionary housing requirement is nineteen dollars and seventy cents per habitable square foot of the residential building area of market-rate housing.

C. For-Sale Residential Projects Within Downtown. The in-lieu housing fee for "for-sale" residential projects within the downtown for which there is a ten-percent inclusionary housing requirement is thirteen dollars and twenty cents per habitable square foot of the residential building area of market-rate housing.

D. Rental Residential Projects Outside of Downtown. The in-lieu housing fee for "rental" residential projects outside of downtown for which there is a fifteen-percent inclusionary housing requirement is twenty-nine dollars per habitable square foot of the residential building area of market-rate housing.

E. Rental Residential Projects Within Downtown. The in-lieu housing fee for "rental" residential projects within the downtown for which there is a ten-percent inclusionary housing requirement is fourteen dollars and fifty cents per habitable square foot of the residential building area of market-rate housing.

F. Basis for calculation of the In-Lieu Housing Fee. The city approves, adopts, and incorporates the summary report from Keyser Marston Associates (KMA), entitled "Summary of Per Square Feet In-Lieu Fee Amounts for Ownership Projects Equivalent to Range of On-site BMR Requirements, and Summary of Per Square Feet In-Lieu Fee Amounts for Rental Projects Equivalent to Range of On-site BMR Requirements for Morgan Hill" dated September 25, 2018. This establishes the value of the in-lieu housing fee, which is determined to be a fair and effective fee to maintain the BMR program.

G. The in-lieu housing fees shall increase annually on January 1 based on the Engineering News Record City Cost Index.

(Ord. No. 2288 N.S., § 1, 10-24-2018; Ord. No. 2326 N.S., § 2, 12-15-2021)

A. The in-lieu housing fees are established for residential projects and will be incorporated into development agreements entered into after the effective date of this ordinance.

B. All collected in-lieu housing fees shall be used to finance the administration and implementation of affordable housing programs and projects within the city of Morgan Hill in support of the goals and objectives established in the city of Morgan Hill housing element.

C. The in-lieu housing fee per square foot resulting from a calculation of total livable space of the market rate project, excludes the garages and other non-habitable space when calculating the total square feet of the project.

D. The in-lieu housing fee will be paid by developers to satisfy their required contribution to the housing in-lieu fee fund.

E. Example calculations of in-lieu housing fee:

1. Amount—Nineteen dollars and seventy cents: Project has fifty-six market rate units. The average habitable square footage of each unit is two thousand square feet. The in-lieu housing fee contribution shall be: Nineteen dollars and seventy cents times fifty-six units times two thousand square feet equals two million two hundred six thousand four hundred dollars.

2. Amount—Thirteen dollars and twenty cents: Project has fifty-six market rate units. The average habitable square footage of each unit is two thousand square feet. The in-lieu housing fee contribution shall be: Thirteen dollars and twenty cents times fifty-six units times two thousand square feet equals one million four hundred seventy-eight thousand four hundred dollars.

3. Amount—Twenty-nine dollars: Project has fifty-six market rate units. The average habitable square footage of each unit is two thousand square feet. The in-lieu housing fee contribution shall be: Twenty-nine dollars times fifty-six units times two thousand square feet equals three million two hundred forty-eight thousand dollars.

4. Amount—Fourteen dollars and fifty cents: Project has fifty-six market rate units. The average habitable square footage of each unit is two thousand square feet. The in-lieu housing fee contribution shall be: Fourteen dollars and fifty cents times fifty-six units times two thousand square feet equals one million six hundred twenty-four thousand dollars.

F. The in-lieu housing fee must be provided to the housing division in proportion to the market rate units being delivered prior to housing division signing off for occupancy.

G. Whenever application of the inclusionary housing requirements results in a fractional number of required inclusionary units of forty-nine hundredths or less, the applicant may elect to pay the in-lieu housing fee instead of developing the inclusionary unit.

H. Example calculation of fractional in-lieu housing fee: the fractional BMR threshold is five-tenths to encourage the construction of new BMR units. The program applies the fractional fee to fractional requirements less than five-tenths of a unit. Project has fifty-six total units; average size of market rate units is two thousand square feet. To receive maximum RDCS points the fifty-six-total unit project has committed to a fifteen-percent affordable commitment, fifty-six units times fifteen percent equals eight and four-tenths. This equates to eight on-site BMR units and a fractional fee payment due for the ".4" units. First, calculate the implicit in-lieu fee: fifty-six units times two thousand square feet times nineteen dollars and seventy cents per SF = an implicit in-lieu fee of two million two hundred six thousand four hundred dollars. From that implicit in-lieu fee, calculate the per BMR unit cost: two million two hundred six thousand four hundred dollars divided by eight and four-tenths equals two hundred sixty-two thousand six hundred sixty-six dollars per BMR unit cost. The fractional payment owed for this project.

(Ord. No. 2288 N.S., § 1, 10-24-2018)