1) The document discusses methods for calculating value enhancement from increased development density and scope in order to determine the appropriate amount of required community benefits contributions. 2) It outlines steps for conducting an incremental profit analysis or residual land value analysis to estimate the value added through zoning changes or density bonuses above what would be permitted originally. 3) This enhanced value is then split between the developer and community in the form of affordable housing, open space, or an in-lieu fee, with the analysis seeking to minimize subjective assumptions.

1. Keyser Marston Associates, Inc.
Crafting the New Normal Workshop
December 7, 2012

2.  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

3.  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

4. Keyser Marston Associates December 7, 2012 4

5.  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

6.  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

7.  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

8. Keyser Marston Associates December 7, 2012 8

9.  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

10.  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

11.  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

12. Keyser Marston Associates December 7, 2012 12

13.  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

14.  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

15.  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

16.  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