Title
Recommendation to Accept the Annual Review of the City of Alameda’s Affordable Housing Unit Fee Requirements Consistent with Section 27-1 of the Alameda Municipal Code; Accept the Annual Affordable Housing Unit Fee Fund Activity Report; and By Motion, Find that: 1) Unit/Fee Requirements Set Forth in Local Law Remain Reasonably Related to the Impacts of Development, and 2) the Affordable Housing Units, Programs and Activities Required by Local Law Remain Needed to Support the Production of Affordable Housing in the City of Alameda. (City Manager 20821840-52010)
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To: Honorable Mayor and Members of the City Council
From: Jennifer Ott, City Manager
EXECUTIVE SUMMARY
On December 19, 1989, the City Council adopted an Affordable Housing Ordinance (Ordinance), which authorized imposing affordable housing in-lieu fees that would apply to non-residential construction. The City of Alameda’s (City) Affordable Housing Unit/Fee (AHUF) requirements may be satisfied either by providing affordable housing units or by paying an in-lieu fee. These in-lieu fee payments are deposited and tracked in the Affordable Housing Fund (Fund 208). Pursuant to Alameda Municipal Code (AMC), the City is required to annually report on the status of the funds and the uses for which the funds were expended. Exhibit 1 shows the AHUF Fund activity for Fiscal Year (FY) 2024-25, including an ending fund balance of $894,842.
BACKGROUND
The Ordinance authorizes affordable housing in-lieu fees that apply to office/research and development, retail, warehouse/industrial, manufacturing, and hotel/motel construction. The Ordinance established the City’s AHUF requirements in Section 27-1 of the AMC and stated that these requirements can be satisfied either by providing housing units affordable to very low-, low- and/or moderate-income households or by paying an in-lieu fee. Such fees are not subject to the Mitigation Fee Act. See California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435 (inclusionary housing regulations are to be reviewed as zoning regulations, and not exactions subject to the restrictions of the Mitigation Fee Act); 616 Croft Ave., LLC v. City of West Hollywood (2016) 3 Cal.App.5th 621 (same).
The Ordinance requires that, at the time of a building permit application, a developer of a non-residential project (new construction or expansion) may satisfy the affordable housing requirement either by providing affordable units or by paying an in-lieu fee. The Ordinance provides developers with a process to apply for an adjustment or waiver of the affordable housing requirement if there is no reasonable relationship between a particular project and the need for affordable housing. The application for an adjustment or waiver is reviewed by the Assistant City Manager, per the City Ordinance for Development Fees (Chapter 27) and as the staff with the “responsibility for administering the City’s affordable housing development programs.” The adjustment or waiver can be appealed to City Council for a final decision.
The AMC mandates that the City Council review the AHUF requirements on an annual basis to determine that they remain reasonably related to the impacts of development and whether the affordable housing units, programs, and activities are still needed. The Annual Report includes a statement of total fees collected, the beginning and ending fund balance, and how the fees were expended during the most recent fiscal year.
This staff report and the attached Affordable Housing Fund Activity Report (Exhibit 1) have been prepared to satisfy the annual review requirements pursuant to Section 27-1 of the AMC for the fiscal year ending June 30, 2025, and to serve as the Annual Report.
Monies in the AHUF fund may only be used in accordance with, and in support of, activities to implement the City's adopted Housing Element. These uses include, but are not limited to, predevelopment or development loans used to develop affordable housing, grants to develop affordable housing, participation leases, or other public/private partnerships and administrative costs to administer related programs. The affordable housing funds may also be expended for the benefit of rental or owner-occupied housing.
DISCUSSION
The Unit/Fee Requirements Set Forth in Local Law Remain Reasonably Related to the Impacts of Development
Prior to adoption of the Ordinance, in 1989, a study was conducted to determine whether construction or expansion of non-residential development was a major factor in attracting new employees to the City, which in turn created a need and demand for additional housing in the City, and consequently, the need for additional affordable housing. It is this jobs-housing imbalance that forms the factual basis of affordable housing need, and the rationale for local legislative solutions. This study was reviewed by the City of Alameda in November 2006. As part of this review, it was concluded that (1) the demand for affordable housing and associated subsidies is comparable to or greater than the demand calculated at the time of the original study in 1989, and (2) the City’s fees are well within the limits of the maximum fees that could be supported.
Since 2006, the jobs-housing imbalance in the nine-county Bay Area has continued to grow. Prior to the COVID-19 global pandemic, the Bay Area Council reported that for every eight jobs created in the San Francisco Bay Area, one residential unit is provided. Housing production is measured by the annual change in the number of housing units within a local jurisdiction and can be positive or negative. In 2024, there were over 19,700 housing units produced in the Bay Area which is 12% lower than the average of the previous five years. (Source: Metropolitan Transportation Commission: Vital Signs Housing Production Update, June 2025). Meanwhile, the number of jobs in the Bay Area increased by 30% from 1990 through 2024. As of 2024, the Bay Area has approximately 3.9 million jobs within the market. (Source: Metropolitan Transportation Commission: Vital Signs Jobs Update, August 2025). The regional impacts of robust job creation without the corresponding production of housing units continues to put intense upward pressure on the cost of housing in the Bay Area.
The S&P CoreLogic Case-Shiller Index (Case-Shiller Index) measures the average change in value of residential real estate given a constant level of quality. The Case-Shiller Index for the San Francisco Metropolitan Area, which includes San Francisco, the East Bay, North Bay and Peninsula, for the 10-year period from July 2015-July 2025, shows a 137% increase in the average change in home value. The economics of supply and demand would indicate this substantial increase in average home value over the last ten years is tied to insufficient supply. The combination of a relatively high jobs-housing ratio and high appreciation rates demonstrate that residential construction rates have not kept pace with job creation. Therefore, it is essential that the City, along with other local jurisdictions, continues to mitigate the impacts of non-residential job creation on housing affordability by requiring the production of affordable housing units or payment of an in lieu fee.
The Affordable Housing Units, Programs and Activities Required by Local Law Are Still Needed
Alameda County and its cities have over 90,000 households who are severely cost burdened and at risk of homelessness. To house everyone affordably, local governments need to produce at least 107,000 new affordable housing units for lower-income households over the next 30 years to have a healthy housing ecosystem. (Source: Alameda County Housing Plan - 10 Year Housing Strategy, July 22, 2025). As of 2023, there are 32,944 affordable homes in the region that are ready to be built but cannot advance until more public funding is secured, and 57% of the Bay Area’s 3.5 million low-income residents are rent-burdened, meaning they pay more than 30% of their household income (Source: Housing Needs in Alameda County: Building a Framework for Equitable Investment, 2023).
Per the City’s Rent Program 2024 Annual Report, the rental market shows that Alameda residents spent 44% of their household income on rent. The City currently has insufficient affordable housing stock to meet demand, while at the same time the demand for affordable housing continues to grow, albeit at a slower pace than previous years. While the 2014 Housing Element identified the need for the creation of 1,723 units in Alameda, the 2022 Housing Element indicates the City’s allocation would increase to 5,353 housing units between 2023 and 2031 to accommodate local and regional housing needs (Source: City of Alameda 2023-2031 Housing Element). Given the extremely low vacancy rate (5% is considered a healthy vacancy rate) and the number of rent-burdened tenant households in the city, it is critical that the City continue to invest in affordable housing production, programs, and activities.
Affordable Housing Fund Revenues and Expenditures
For FY 2024-25, the AHUF Fund (208) starting balance was $922,197. A total of $52,323 in revenues were recorded for FY 2024-25, including $0.00 in fees, $3,346 in principal and interest payments, and $48,977 in investment income. This is in stark contrast to the total revenues of $1,344,773 that were collected in FY 2020-21 from projects developed by Alameda BTS EDP, LLC and South Loop 1 LLC. The contrast in revenue is primarily due to development progress and economic conditions. Total expenditures for FY 2024-25 were $81,492 for program implementation, including salary and benefits, professional services, and fixed charges. The FY 2024-25 ending balance for the AHUF Fund was $893,028 as of June 30, 2025.
Planned Expenditures
In January 2022, through a Notice of Funding Availability (NOFA), staff made available $750,000 of AHUF funds. At the June 2022 City Council meeting, the City Council approved staff’s recommendation to split the HOME and AHUF funds between the two permanent, supportive housing projects for formerly homeless individuals, 1245 McKay Avenue and North Housing Permanent Supportive Housing (PSH) I. North Housing PSH I, also known as Estuary I, was completed in the summer of 2025 and the grand opening took place on September 25. Estuary I is the City’s first 100% permanent supportive housing complex and features 45 units for previously homeless households. A total of $375,000 was disbursed in FY 2023-24 to finance a portion of the North Housing PSH I. The 1245 McKay Avenue project will receive $375,000 in AHUF funding and $403,654 in HOME funding. Construction is expected to commence in late 2026.
AHUF revenues received by the City vary each year. While the FY 2020-21 revenues were greater than the City had received during the previous five years, the City collected no affordable housing fees in the last three fiscal years (2022-23, 2023-24, and 2024-25). Consequently, staff continues to recommend retaining the existing fund balance of $893,028. As part of that fund balance, $375,000 remains allocated for the 1245 McKay Avenue project. The $518,028 that remains unallocated may be used for expenses and projects that arise over the next five years.
Review of Fee Rates
The Ordinance also establishes a method for increasing the fee annually. In 27-10a, it states, “The affordable housing unit/fee resolution may provide for an annual increase in the amount of the fee to reflect the percentage increase in the cost of construction or public improvements as reported in the Engineering News Record-Construction Price Index for the San Francisco Bay Area.” Notwithstanding the amount in the fund at the end of FY 2025-26, staff is not recommending any revisions of the fee rates at this time.
ALTERNATIVES
• Accept the Annual Review of the City of Alameda’s Affordable Housing Unit Fee Requirements
• Provide direction to staff regarding the annual AHUF Fund Activity Report prior to acceptance.
FINANCIAL IMPACT
There is no financial impact from conducting or accepting an annual review of the Ordinance. All the revenues collected from the City’s AHUF are deposited into the Affordable Housing Fund (208/legacy fund 266) and can only be used for eligible housing-related purposes as specified in the Ordinance.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This Annual Review and the attached Annual Report are consistent with the requirements of Section 27-1 (Affordable Housing Unit/Fee Requirements) of the AMC.
ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) applies only to projects that have the potential for causing a significant effect on the environment. In accordance with the California Environmental Quality Act (CEQA), this action is categorically exempt from further environmental review pursuant to Public Resources Code section 21065 and CEQA Guidelines section 15378.
CLIMATE IMPACT
There are no identifiable climate impacts or climate action opportunities associated with accepting the Annual Review of the Affordable Housing Ordinance and the Annual AHUF Fund Activity Report.
RECOMMENDATION
Accept the annual review of the City of Alameda’s Affordable Housing Unit Fee Requirements consistent with Section 27-1 of the Alameda Municipal Code; accept the annual Affordable Housing Unit Fee Fund Activity Report; and, by motion, find that 1) unit/fee requirements set forth In local law remain reasonably related to the impacts of development; and 2) the affordable housing units, programs and activities required by local law remains needed to support the production of affordable housing in the City.
Respectfully submitted,
Amy Wooldridge, Assistant City Manager
By,
C’Mone Falls, Housing and Human Services Manager
Andre Fairley, Housing and Human Services Management Analyst
Financial Impact section reviewed,
Ross McCarthy, Finance Director
Exhibit:
1. FY 2024-25 AHUF Annual Report