Keyser Marston Associates, Inc.Crafting the New Normal Workshop December 7, 2012
A developer will only request an increase in development scope if it is anticipated to enhance the project economics. Community Benefits can only effectively only be obtained if an enhancement in value is demonstrated. Implicitly, value enhancement is split among the developer, the property owner and the community benefit being provided. Keyser Marston Associates December 7, 2012 2
Affordable Housing Units: Public Benefit Cost Equals Affordability Gap Between Market Rate and Affordable Price Public Parking: Public Benefit Cost Equals Incremental Construction Costs Per Parking Space Open Space: Public Benefit Cost Equals Appraised Land Value x Land Area Contributed Keyser Marston Associates December 7, 2012 3
Code applies to the Santa Ana Regional Transportation Center, and provides for: ◦ Broadened commercial and industrial zoning to allow residential uses; and ◦ Development at increased densities. Housing Opportunities Ordinance (HOO) was enacted with the Transit Zoning Code to assist in meeting RHNA goals. Keyser Marston Associates December 7, 2012
HOO imposes affordable housing obligations when: ◦ Commercial or industrial land is converted to residential ◦ Residential density is increased ◦ Percentage of residential development is increased ◦ Rental units are converted to condominium units Keyser Marston Associates December 7, 2012
15% of new residential units must be subject to long-term income and affordability covenants; or An in-lieu fee can be paid with the fee amount calculated on a project-by-project basis; or Existing uninhabitable apartments can be acquired and substantially rehabilitated. Keyser Marston Associates December 7, 2012
The Ordinance allows mixed-use development to obtain density increase in return for provision of community benefits Value enhancement is calculated using an incremental profit analysis. The calculation methodology minimizes the number of subjective assumptions. Keyser Marston Associates December 7, 2012 9
Step 1: Identify the Increase in the Number of Dwelling Units Step 2: Estimate the Market Value per Unit by Appraisal or Market Study Step 3: Apply an Agreed Upon Threshold Profit % Keyser Marston Associates December 7, 2012 10
Step 4: Value Enhancement = ◦ Agreed Upon Profit % x Market Value Per Unit x Number of Additional Units Step 5: Calculate the Community Benefits Contribution: ◦ Equal to Value Enhancement x Agreed Upon % Keyser Marston Associates December 7, 2012 11
The LUCE provides three development tiers: the Base Zoning (Tier 1) and two discretionary tiers (Tiers 2 and 3). Community Benefits Tier Height Limit Required? 1 32 Feet / 2 Stories No 2 45 Feet / 4 Stories Yes 3 Above 45 Feet Yes Keyser Marston Associates December 7, 2012 13
Based on value enhancement, which is estimated using a detailed residual land value analysis that compares: ◦ The Base Zoning scenario to the ◦ Proposed development scope. The benefit to this methodology is that it provides a more precise estimate of value enhancement. Keyser Marston Associates December 7, 2012 14
Step 1: Estimate the project’s construction cost Step 2: Estimate the sales revenue or the capitalized project value. Step 3: Estimate the residual land value Step 4: Calculate the value enhancement Step 5: Identify the amount of the community benefits contribution Keyser Marston Associates December 7, 2012 15
Understand your real estate market. Make planning decisions regarding land use before making fiscal decisions. Do not over reach on the community benefits requirements. Create appropriate mechanisms for enacting community benefits requirements. Keyser Marston Associates December 7, 2012 16
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