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Fee to Build Affordable Units Off-Site Remains Stable

Bob Kronovetrealty
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Santa Monica

Santa Monica Apartments

Santa Monica College
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Santa Monica, CA 90405
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By Jorge Casuso

November 20, 2020 -- For the first time in a decade, developers who build off-site affordable housing in Santa Monica won't see their fees increase, according to a report issued by the City Thursday.

The total per unit cost of land and construction -- which helps determine the fee developers pay to build mandated affordable units off-site -- remained stable at $382,795 per unit in 2020.

That left the base fee for 2020 at 2019 levels, or $36.49 per square foot for apartments and $42.62 for condominiums, according to the report from Andy Agle, the director of Community Services.

"For the 2020 calculations, the annual increase in construction costs has been offset by decreasing land costs, resulting in zero adjustment for the Affordable Housing Unit Base Fee and Affordable Housing Unit Development Cost," Agle wrote.

The City's Affordable Housing Production Program (AHPP) requires developers of new market-rate multi-family housing to contribute to the City's goal to make 30 percent of all units built affordable.

Developers can comply by "designating a portion of a development’s total residences as affordable housing, constructing affordable housing off site, designating land for affordable housing development, or paying an affordable housing fee," the report said.

The fee is based on floor area, with multi-family projects with "fractional affordable housing units of less than 0.75" calculated proportionally.

To determine the cost of building affordable housing, officials looked at the two most recent City-assisted developments.

Greenway Meadows, a 39-unit development at 2120 Lincoln Boulevard, cost $5.25 million for the land and approximately $19.65 million in construction costs for a total of nearly $25 million.

Magnolia Villas, a 40-unit senior housing development at 1445-1453 10th Street, paid the same for the land and approximately $13.64 for construction, for a total of nearly $18.9 million.

The Affordable Housing Unit Development Cost has risen from $265,632 per unit when the methodology was approved by the City Council in 2007 to the current $382,795, according to the report.

The fee rate has fluctuated over the past decade dropping by 1.2 percent in 2010 and rising to a high of 5 percent in 2017.

Agle said the revenues generated by the fees fluctuate depending on the number of developments required to pay.

"It really varies from yer to year," Agle said, adding that most large developments choose to build the units on-site rather than pay the fee.

As a result, the amount generated by the fee is relatively small compared to other revenue streams used by the City to help build affordable housing.

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