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Kathleen Head Panel 2

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Tools for Ensuring Equitable Investments - the California Context

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Kathleen Head Panel 2

  1. 1. Keyser Marston Associates, Inc.Crafting the New Normal Workshop December 7, 2012
  2. 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. 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. 4. Keyser Marston Associates December 7, 2012 4
  5. 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. 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. 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. 8. Keyser Marston Associates December 7, 2012 8
  9. 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. 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. 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. 12. Keyser Marston Associates December 7, 2012 12
  13. 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. 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. 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. 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

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