HomeMy WebLinkAboutInformation Update.202003161
AGENDA
INFORMATION UPDATE
March 16, 2020
12:00 AM,
I.INFORMATION UPDATE
I.A.Affordable Housing Fee-In-Lieu Study
1
INFORMATION ONLY MEMORANDUM
TO: Mayor Torre and Aspen City Council
FROM: Ben Anderson, AICP; Principal Planner
THROUGH: Phillip Supino, AICP; Community Development Director
MEMO DATE: March 13, 2020
RE: Affordable Housing Fee-in-Lieu Study – Report
Information Only
REQUEST OF COUNCIL: Initially proposed for presentation by the consultant team
at the work session on March 16, 2020, staff is forwarding on the draft report for
Council’s review in anticipation of a rescheduled work session.
Council is asked to review the results of the Affordable Housing Fee-in-Lieu (FIL) Study
presented in a report prepared by White and Smith in partnership with TischlerBise. The
report and its findings provide recommendations related to the calculation of the FIL,
methodologies for updating the FIL, the relationship of the FIL to the Affordable Housing
Credits Program, and the legal sufficiency of Aspen’s current methodology.
SUMMARY AND BACKGROUND:
In August of 2019, Council approved a professional services contract with the consultant
team to engage in a study of the City of Aspen’s Affordable Housing Fee-in Lieu. The
consultant team worked with staff to understand how the existing FIL was established in
2015 and how the FIL intersects with the Land Use Code, APCHA Guidelines, and the
Affordable Housing Credits Program. In November of 2019, the consultant team
conducted a site visit to Aspen and met with staff, members of the development
community, and City Council to further this understanding.
Since November, the consultant team, in working with staff, has identified relevant case
studies, analyzed past and current affordable housing projects within the City of Aspen,
studied Aspen’s FIL with a focused eye on the legal sufficiency of the program, and have
applied their expertise in thinking about how to formulate the FIL to optimize the outcomes
of Aspen’s affordable housing efforts. The report is a summary of these efforts and
outlines the resulting recommendations.
It is important to note however, that the scope of this study did not include an updated
calculation of the FIL. As such, the report does not propose a specific update to the FIL.
Instead, the report proposes a series of policy and methodology recommendations that
can be used to establish a new calculation.
2
Page 2 of 3
Affordable Housing Fee-in-Lieu Study
DISCUSSION:
The report is comprehensive in its coverage of the topic, and so to avoid redundancy,
staff’s comments here are limited.
As Council considers the report and its implications, it is helpful to keep in mind the
following:
1. FIL is only one part of the calculation that determines the ultimate mitigation that
development is required to incur. Employee Generation and Mitigation rates are
equally as essential – as is the square footage of affordable housing per mitigated
FTE that the Land Use Code requires.
2. Under current code, FIL is infrequently utilized. Today, it is primarily used for three
things:
Development that generates less than 0.1FTE of required mitigation
The removal of deed restrictions from ADUs – which allows FIL by
right for the required mitigation
As a tool for converting the value of Affordable Housing Credits from
one Category to another
While applicant’s have the ability to request payment of FIL as an option for
mitigation for larger projects, staff can identify only one approval of significance
that has utilized FIL since the change of the LUC discouraging its use.
3. Aspen’s existing (and the report’s recommend methodology) FIL is calculated
using a cost-based approach. A cost-based approach to FIL includes three
components. The first two, construction/development costs and land acquisition
costs, are apparent. The third is less so. A key determinant in Aspen’s current
FIL – is the prediction of revenue from affordable housing development. The
current differentiation of FIL across APCHA’s Category system is the primary
consequence. Because sales prices and rents are different across these
Categories, the revenue coming in on a particular unit is different. Essentially, the
difference between the full cost of development and the revenue establishes the
FIL. This explains why the FIL for Category 2 is higher than for Category 4.
4. It is important to note that the costs that determined the 2015 FIL were based on
estimates of future costs of development.
OUTCOMES OF REPORT:
Staff finds that the report provides recommendations that are very helpful in thinking about
how to improve the methods for calculating and updating the FIL. However, because of
the integrated nature of the Land Use Code, APCHA Guidelines, and other aspects of
Aspen’s affordable housing context, the report also identifies areas under which the
evaluation of the FIL raises larger policy questions that may be useful as Council and staff
evaluate the affordable housing program writ large.
3
Page 3 of 3
Affordable Housing Fee-in-Lieu Study
NEXT STEPS:
Staff will coordinate with the consultant and City Manager to reschedule the work session.
Either in-person, or virtually, Council will have the opportunity to discuss the report with
the consultant team. Additionally, staff will be providing recommendation for how to
respond to the recommendations in the report.
In the meantime, please reach out to Ben Anderson if you have questions about the
report. ben.anderson@cityofaspen.com; 429.2765
EXHIBIT A: DRAFT – Fee-in-Lieu Assessment and Recommendations Report
4
FEE-IN-LIEU
ASSESSMENT AND
RECOMMENDATIONS REPORT
City of Aspen
March 13, 2020
CITY COUNCIL REVIEW DRAFT
THIS REPORT IS IN DRAFT FORM FOR DISCUSSION ONLY.
IT WILL BE REVISED BASED ON CITY INPUT AND DIRECTION.
5
ii
DRAFT - FOR DISCUSSION ONLY
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY ...........................................................1
A. B A ckground .....................................................................1
B. The Fee-in-L ieu c AL cuLATion ..............................................3
c. S cope o F W ork ...............................................................3
1. Methodology Issues: ........................................................3
2. Policy Issues: ...................................................................4
d. S ummAry o F recommend ATion S ............................................4
1. Methodology Recommendations .......................................4
2. Policy Recommendations ..................................................6
e . n ex T ST epS .......................................................................7
II. INTRODUCTION ...................................................................10
A. h iST ory And overvie W oF AFFordABLe houSing p rogr A m .....10
1. General Overview ..........................................................10
2. Deed Restricted Units Created To-Date ...........................11
3. Fee-in-Lieu Collections To-Date ......................................12
4. Status of the Affordable Housing Credits Program ............13
B. hiST ory oF T he Fee -in-L ieu progrA m .................................14
1. Fee-in-Lieu: 1985-2015 .................................................14
2. The Affordable Housing Credit Program ...........................15
3. Public & Private Revenues through Fee-in-Lieu & Credits ..16
c. reporT o Bjec Tive S .........................................................17
III. METHODOLOGY ISSUES AND RECOMMENDATIONS .........19
A. m e ThodoLogy overvieW ..................................................19
B. curren T Fee -in-Lieu ........................................................20
1. The 2015 Update to the Fee-in-Lieu ................................20
2. 2018 Adjustment to the Fee-in-Lieu ................................23
c. m e ThodoLogy iSSueS ......................................................25
6
iii
DRAFT - FOR DISCUSSION ONLY
TABLE OF CONTENTS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
1. Whether the current methodology for calculating the Fee in Lieu
adequately captures the full cost impact to provide affordable
housing in the City of Aspen?
a) Discussion ............................................................26
b) Recommendation ..................................................28
2. Whether the cost components in the fee-in-lieu calculation need
to be adjusted to reflect costs specific to Aspen’s construction market?
a) Discussion ............................................................29
b) Recommendation ..................................................34
3. Whether an alternative methodology for calculating the annual fee adjustment may more accurately reflect increases in construction costs in the area?
a) Discussion ............................................................35
b) Recommendation ..................................................36
4. Whether the current fee-in-lieu affects the market and
sustainability of the Affordable Housing Credit System? Is
the fee-in-lieu amount reflective of the actual cost to deliver
affordable housing by the private sector?
a) Discussion ............................................................38
b) Recommendation ..................................................41
d. A ddi Tion AL m e ThodoLogic AL conSider AT ionS .......................42
1. Employee Generation Rates and Mitigation Rates ............42
a) Employee Generation Rates ...................................42
b) Residential and Non-Residential Mitigation Rates ...42
c) Occupancy Standard (employees per unit) ..............43
IV. POLICY ISSUES AND RECOMMENDATIONS .......................46
A. p o L icy o vervie W .............................................................46
B. LegAL BA ckground & revie W ............................................46
1. Generally .......................................................................46
2. The Legal Framework for Local Governments ..................47
a) Nomenclature .......................................................47
b) Constitutional Considerations ................................48
7
iv
DRAFT - FOR DISCUSSION ONLY
TABLE OF CONTENTS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
c) State Law Considerations .....................................49
c. p o L icy i SSue S .................................................................51
1. What are the policy ramifications and legal issues surrounding the fee-in-lieu option as a component of the City’s current
housing mitigation program?
a) Discussion ............................................................51
b) Recommendation ..................................................52
2. What are the policy ramifications and legal issues with regard
to the thresholds and conditions under which an applicant may
pay fee-in-lieu as a compliance options?
a) Discussion ............................................................52
b) Recommendation ..................................................53
3. What are the implications of the City’s fee-in-lieu thresholds on
the City’s housing credit program?
a) Discussion ............................................................54
b) Recommendation ..................................................54
d. A ddi Tion AL p o L icy c on S ider ATion S .....................................54
1. Income Categories of Affordability ...................................54
2. Exemptions and Applicability ...........................................55
3. Mitigation Review Processes & Credit Issuance ................55
V. REPORT RECOMMENDATIONS & NEXT STEPS ....................57
A. in generAL .....................................................................57
B. m e ThodoLogy recommend ATion S .......................................59
c. p o L icy r ecommendAT ionS .................................................60
d. T he B ig p icT ure ..............................................................61
APPENDIX A: GLOSSARY AND LIST OF ABBREVIATIONS ........63
APPENDIX B: CASE STUDIES ...................................................65
APPENDIX C: CONSTRUCTION COST DETAIL .........................91
APPENDIX D: LAND ACQUISITION COSTS DETAIL .................93
APPENDIX E: DEVELOPMENT COST WORKSHEET ..................95
8
1
I. EXECUTIVE SUMMARY
A. BACKGROUND
Since the 1980s, Aspen has been at the forefront of the “affordable housing challenge” that
eventually has confronted much of the mountain west and, in fact, much of the country in
the last decade. Early on, the City adopted fee-in-lieu options for developers to mitigate the
impact of their new square footage had on the need for
additional housing that was available to the workforce it
created. Though the demand for affordable housing in
Aspen remains high, the program has been successful
in many regards. Since 2000 alone, 586 affordable
units have been constructed under the City’s program.
Nonetheless, the challenge of keeping up continues.
The City has made a number of structural and
methodological changes over the years, but a constant
has been its use of the fee-in-lieu as a housing mitigation option available to the development
community, which for many is a much simpler and faster way of doing so. The fee-in-lieu has
been updated a number of times and currently is as follows, by income category, per full-time
equivalent (FTE):
Category 1 - $381,383.31
Category 2 - $342,599.02
Category 3 - $306.549.65
Category 4 - $238,687.04
Category 5 - $168,289.60
Category 6 - $142,114.19
Category 7 - $111,438.36
However, like most communities with programs like Aspen’s, the City recognizes that the
timeframe between payment of a fee-in-lieu and the construction of housing is typically
much longer than for housing constructed at the time of development. For this reason, given
the urgency of its housing challenge, the City eventually incentivized constructed housing
over fee-in-lieu payments, but reducing the threshold at below which by-right fee-in-lieu is
permitted. This created a private sector credit-driven system, by offering other mitigation
compliance alternatives that are more likely to result in more housing more quickly.
Construction costs per square
foot of housing built by the City
are estimated today to be about
40% higher than in 2015.
This represents roughly an 8%
average increase each year.
9
2
DRAFT - FOR DISCUSSION ONLY
I. ExEcutIvE Summary
A. BAckground
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
As a precedent to an anticipated update to the fee-in-lieu study, the City commissioned White
& Smith, LLC and TischlerBise to evaluate certain policy-based and methodological aspects
of its current program to serve as a guide to the update. This report sets out our findings and
recommendations for Tasks 1 through 3, or Phase I of a five-task project, as follows:
Phase 1
Task 1 Review Current Program & Conduct Stakeholder Meetings:
Performed in September through November 2019
Task 2 Draft Assessment & Recommendations Report:
Performed November through March 2020
Task 3 Present Assessment & Recommendations Report and Finalize
Recommendations:
March 2020
Phase 2
Task 4: Prepare Updated City Affordable Housing Fee-in-Lieu Program:
TBD
Task 5: Additional On-Site Meetings:
TBD
The objectives for the Tasks 1-3 are to:
1. Identify a methodology for ensuring
construction and land costs used to calculate
the fee-in-lieu are current, complete, and
reflective of the Aspen environment;1
2. Assess current policies related to impact of
the fee-in-lieu option on the resultant housing
actually constructed;
3. Evaluate the legal aspects of the current fee-
in-lieu, its qualifying thresholds, and of a policy
which would require built housing, instead of
fee-in-lieu, to meet mitigation regulations; and
4. To establish an efficient, defensible, and
transparent means of annually adjusting
the fee-in-lieu to stay current with localized
construction and land costs.
1 Note that the Task 4 fee-in-lieu calculation study will include components in addition to construction costs,
including revenue streams available to the developer (currently the City), which may result from future sales,
rentals, and other sources.
This Report provides
guidance to inform the City’s
next update to its fee-in-lieu
schedule. It does not include
an updated fee calculation.
The amount of an updated
fee-in-lieu can only be
determined after a full study
is completed.
10
3
DRAFT - FOR DISCUSSION ONLY
I. ExEcutIvE Summary
c. Scope of Work
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
In addition, during our discussions with City Council, City staff, developers, and other
stakeholders at the beginning of this process, a number of additional issues were raised,
which we have incorporated into our recommendations for the City’s consideration prior to
and during the update study.
Finally, we have evaluated the options the City might consider for approaching any changes
to its methodology or housing mitigation policies. We did this by surveying a number of other
jurisdictions around the country and assessing what they are doing in light of what Aspen may
consider doing. Our findings from this review are summarized in Appendix B.2
B. THE FEE-IN-LIEU CALCULATION
The City’s current fee-in-lieu schedule, prepared in 2015 and updated in 2018, is based on
a “cost-driven” approach, which resulted from extensive evaluations of alternative iterations
calculation methodologies. A prior study, in 2012, outlined a “market-affordability gap”
approach, which as among the options considered at that time.
Opting for the “cost-driven” approach, the City’s fees reflect costs estimates of several City
housing projects that were pending and in the preliminary stages of design at that time, and
appears to have been calculated as the difference between:
1. the City’s total development costs of an affordable housing unit; and
2. the deed-restricted sale price or rental revenue stream anticipated from the unit.
The revenue stream available to the City may include components not available to the private
sector, including tax credits, low-interest loans, and grants.
This difference between development costs and future revenue streams was seen as the
“subsidy” necessary to cover the City’s net costs to develop the housing stock it anticipated
at that time, in response to the additional housing demand generated by those who paid the
fee-in-lieu.
C. SCOPE OF WORK
This report answers four specific questions related to methodology and three related to policy
or legal matters. We also have provided general guidance to the city attorney’s office and
city staff related to the legal issues that surround fee-in-lieu programs nationally. The specific
methodological and policy questions we addressed in Tasks 1-3 are as follow.
1. Methodology Issues:
1. Whether the current methodology for calculating the fee-in-lieu adequately
2 A glossary of terms and list of abbreviations is provided as Appendix A.
11
4
DRAFT - FOR DISCUSSION ONLY
I. ExEcutIvE Summary
d. SummAry of recommendAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
captures the full and total cost impact to provide affordable housing in the City
of Aspen?
2. Whether the cost components in the fee-in-lieu calculation need to be adjusted
to reflect costs specific to Aspen’s construction market?
3. Whether an alternative methodology for calculating the annual fee adjustment
may more accurately reflect increases in construction costs in the area?
4. Whether the current fee-in-lieu affects the market and sustainability of the
Affordable Housing Credit System? Is the fee-in-lieu amount reflective of the
actual cost to deliver affordable housing by the private sector?
2. Policy Issues:
1. What are the policy ramifications and legal issues surrounding the fee-in-lieu and
affordable housing credit options as components of the City’s current program?
2. What are the policy ramifications and legal issues surrounding the
circumstances under which an applicant may pay fee-in-lieu as a compliance
option?
3. What are the implications of the City’s fee-in-lieu thresholds on the City’s
housing credit program?
This report addresses each of these areas and offers recommendations for how each should
be approached during the City’s fee-in-lieu update study. Those recommendations are
summarized below.
D. SUMMARY OF RECOMMENDATIONS
Our recommendations and underlying analyses are set out in full in the report, but are
summarized as follows:
1. Methodology Recommendations
1. Use a “cost-driven” approach to update the fee-in-lieu calculations, in order to
capture full net costs of construction.
The update should include updated cost figures based on recent and
representative City affordable housing projects, the City’s share of costs to
development, and applicable revenue assumptions based on income levels
targeted for affordable units.
If permissible, determine whether it is appropriate to consider the City’s costs for
staff time, overhead, and other related “soft” costs.”
Assuming fee-in-lieu revenues continue to be used solely for City projects,
12
5
DRAFT - FOR DISCUSSION ONLY
I. ExEcutIvE Summary
d. SummAry of recommendAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
actual costs should be reduced by anticipated revenues from sales, rentals, and
other sources that will accrue to the City.
The formula is depicted graphically as follows:
Components of the formula shown in orange above reflect variables that if
changed would impact the fee-in-lieu amounts (see Methodology
Recommendation #6, below). These variables will be revisited and confirmed
during the Task 4 full fee study update.
2. Calculate land and construction costs separately during the update and annual
adjustments. Despite the challenge of incorporating land costs into a static
formula, assumptions can be made, based on the anticipated end use of fee
revenues. Use of the fees, as to land, will vary according to the location of lands
anticipated for the City’s development of affordable housing.
3. Calculate costs and revenues “per square foot” to set the fee-in-lieu and to
simplify the initial calculation, as well as annual adjustments. The cost per
square foot can then be shown by land use type or “per FTE,” as needed.3 For
consistency, the same square footage factor should be used between bedrooms
and FTEs mitigated, for both the fee-in-lieu and AHC program.
3 The current Land Use Code establishes a conversion factor of 400 square feet of net livable area per FTE.
See § 26.470.050. Therefore, a simple calculation emerges, using the rounded down gross cost per square
foot from recent City affordable housing projections, based on land and construction.
13
6
DRAFT - FOR DISCUSSION ONLY
I. ExEcutIvE Summary
d. SummAry of recommendAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
4. The City should base its annual fee-in-lieu adjustments on the Engineering News
Record (ENR) Construction Cost Index (CCI)4. This approach will reasonably
capture Aspen’s market trends and realities, particularly if:
a. the National ENR CCI is used, not the city-specific CCI, which is
susceptible to localized price fluctuations due to labor markets,
weather, and other trends, which may not reflect the unique location
and environment of Aspen; and
b. the City makes the annual adjustment consistently each year.
As noted in 2. above, land costs should be addressed separately during annual
adjustments, in order to better reflect Aspen-specific changes in construction
costs.
5. While the amount of the fee-in-lieu may impact the value of private market
credits in some instances, the connection between the two could not be
established strongly enough to amount to a recommendation regarding the fee-
in-lieu update.
6. Revisit the following component variables of the housing mitigation program, for
verification or update:
a. employee generation rates;
b. residential and nonresidential mitigation rates; and
c. employees per residential dwelling unit (i.e., square feet of dwelling unit
per employee).
2. Policy Recommendations
1. Retain the fee-in-lieu option. Monitor legislative or judicial changes during the
City’s nexus study update.
2. Maintain or increase, but do not decrease, availability of the fee-in-lieu option as
an alternative means of complying with the GMQS.
3. Future policies and methodologies should be based on legal defensibility,
fairness, and effective production of affordable housing, and not the amount of
the fee-in-lieu relative to the value of affordable housing credits.
4. Consider whether revisions to components of the housing mitigation program
would increase the availability of constructed affordable housing for Aspen
employees, including:
a. whether additional income categories of affordability should be
considered as qualifying mitigation;
4 ENR provides two main cost indices: Construction Cost Index (CCI) and the Building Cost Index (BCI). Labor
assumptions vary between the two indices: CCI includes 200 hours of common labor at the 20-city average
of common labor rates; BCI includes 68.38 hours of skilled labor at the 20-city average rates of bricklayers,
carpenters, and structural ironworkers. Building materials are the same in both indices.
14
7
DRAFT - FOR DISCUSSION ONLY
I. ExEcutIvE Summary
e. next StepS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
b. whether existing exemptions and applicability criteria continue to meet
City objectives;
c. whether current processes for mitigation approval, qualifying thresholds,
and credit issuance and timing, can be revamped to encourage greater
participation or efficiency of process.
In addition, the GMQS and AHC program should be
simplified where possible and be revised to remain
consistent with, and not redundant of, APCHA Guidelines.
Finally, there are several additional areas we recommend
the City revisit prior to or during the update, which
address some “structural” aspects of the City’s program.
These surfaced during our kick-off meetings with local
developers, community members, the City Council, and
staff in November 2019 and during our review of the City’s
program over the last four months. Our conversations with
stakeholders have been wide-ranging and very informative, providing useful guidance in
the development of this report. These ten areas are listed in the Next Steps sections which
follows.
E. NEXT STEPS
We recommend the City prepare a full study to updated the fee-in-lieu schedule.
However, as this study has shown, there are many overarching considerations to be
made when updating a fee-in-lieu study. For example, our recommendations assume fee
revenues will continue to be used solely for affordable housing projects the City develops, as
opposed to the private-sector, which current derives its subsidy from the City’s Affordable
Housing Credit program. If the City were either (a) to use fee-in-lieu revenues to fund private
development projects; or, conversely (b) to no longer maintain the credit program, then
the cost assumptions that are the subject of this report would be revised to reflect such
significant policy changes.
For these reasons, we recommend the City further consider whether:
1. the role or levels of participation of the public and private sectors in the updated
program should be evaluated, to ensure fee expenditures remain consistent with
study cost assumptions;
2. the fee-in-lieu will continue to be used solely for City projects or will be shifted at
all to private sector projects;5
5 See Boulder County’s competitive bid process for disbursing county sales and use tax revenues to non-
profits and housing authorities, as a resource or guidance.
EXECUTIVE SUMMARY
While the primary objective
of updating the fee-in-
lieu is to address cost and
revenue assumptions, the
City also should revisit
other components, including
employee generation rates,
mitigation rates, and
occupancy standards.
15
8
DRAFT - FOR DISCUSSION ONLY
I. ExEcutIvE Summary
e. next StepS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
3. the fee-in-lieu and AHC programs each remain an effective and viable means of
generating new affordable housing;
4. bonuses or waivers should be used to incentivize private sector participation in
the AHC program or to address issues of voluntariness; 6
5. dormitory or other housing types are appropriate forms of mitigation today;
6. the geographic areas within which qualified mitigation is eligible should be
expanded or revised; and
7. the City should take on an increased role in administering and monitoring the
AHC program.
Having considered and, to the extent possible, resolved some of these policy areas, the
City will be prepared to undertake the Task 4 fee-in-lieu study update that incorporates the
recommendations outlined in this report and summarized earlier.
6 The district court, in Meyerstein v. City of Aspen, found that a deed restricted unit was the result of a
voluntary agreement, since it was entered into freely by the City and a private party without evidence of
threat, duress, or lack of reasonable alternatives. See No. 13CA0330, 5-6 (Jan. 20, 2014) on remand from
Meyerstein v. City of Aspen, 282 P.3d 456 (Colo. Ct. App. 2011).
16
INTRODUCTION
17
10
II. INTRODUCTION
A. HISTORY AND OVERVIEW OF AFFORDABLE HOUSING PROGRAM
1. General Overview
For more than 40 years, Aspen has been a national leader in responding to the challenges
of housing affordability. As real estate prices began to rise in the 1970s, the City of Aspen,
in coordination with Pitkin County, began implementing innovative solutions in the provision
of deed-restricted, affordable housing units for residents and the demands of a growing
workforce. Among these innovative approaches have been:
»Inclusionary zoning requirements through the City’s Growth
Management Quota System
»Cash contributions for affordable housing for commercial and
residential development (fee-in-lieu)
»The creation of the Aspen Pitkin County Housing Authority (APCHA)
»Policies and purchase decisions in support of land banking
»Accessory Dwelling Units
»Real estate transfer tax in support of affordable housing
»Sales tax in support of affordable housing
»Partnering with the private sector in the development of affordable units
»City development of units specifically for city employees
»Affordable Housing Credits Program
Combined, these programs have resulted in approximately 3,000 units that currently make up
APCHA’s deed-restricted housing inventory.
The City’s current system is implemented through its Growth Management Quota System
(GMQS) (see § 26.470, Land Use Code) and Certificates of Affordable Housing Credit program
(§ 26.540, Land Use Code). The GMQS requires residential and nonresidential development,
which creates the demand for new employee housing to contribute that housing proportional
to its impact; that is, based on the number of full-time equivalents, for “FTEs,” the
development will need to serve it. This may be done through construction, deed-restrictions
of free-market units, or through payments to the City or to a developer of affordable housing
through the City’s Affordable Housing Credit (AHC) program.7
7 A glossary of terms and list of abbreviations is provided as Appendix A.
18
11
DRAFT - FOR DISCUSSION ONLY
II. IntroductIon
A. HiStory And overvieW of AffordABle HouSing progrAm
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
This report is the result of the City Council’s interest in
evaluating possible revisions or updates to the City’s
program, which may increase the production of affordable
housing and make the process simpler and more
efficient, while ensuring the program’s continued legal
defensibility. The report recommends several updates
to the City’s program and methodology to address these
considerations.
In order to provide some context for these
recommendations, the following sections describe the
extent of the City’s progress in tackling its affordable
housing challenges, including a description of the deed-
restricted units built within the City, as well as a summary
of those created by private developers in exchange for
credits, under section 26.540, Land Use Code.
2. Deed Restricted Units Created To-Date
The following represent several of the program’s successes since 2000:
On-site housing projects completed as a component
of a private development:
1. Aspen Valley Hospital – 18 units
2. South Aspen Street Townhomes – 16 units
City led and funded projects (including units for City employees):
1. Burlingame Phases 1 and 2A, and 2B – 258 units
(179 complete, 79 in progress)
2. Burlingame Ranch Seasonal Housing – 69 units
3. Truscott – 99 units
4. 7th and Main Affordable Housing – 11 units
City led and funded projects – for housing City employees:
Aspen Police Department – 8 units
Projects developed by the private sector in partnership with the City:
1. 517 Park Circle – 11 units
2. 488 Castle Creek – 24 units
3. 802 W. Main – 10 units
Programmatic changes are
recommended to:
Ensure Updated Fees-in-Lieu
reflect current, actual, localized
costs of Housing Construction
Increase transparent,
simplicity, and efficiency
Clarify the roles of the City’s
Fee-in-Lieu and private sector
Affordable Housing Credits
Achieve an effective and
easy-to-administer Annual
Adjustment Methodology
19
12
DRAFT - FOR DISCUSSION ONLY
II. IntroductIon
A. HiStory And overvieW of AffordABle HouSing progrAm
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Housing projects resulting from the Affordable Housing Credits Program (projects
for which the City issued credits to private-sector developers of affordable
housing):
1. 301 W. Hyman – 8 units
2. 518 W. Main – 11 units
3. 412 AABC – 8 units
4. 404 Park – 28 units (in progress)
5. 834 W. Hallam – 7 units (in progress)
6. 210 W. Main – 8 units (in progress)
While the program has been successful in responding to the need for development of
affordable housing, the need for new units continues to grow. The City of Aspen is committed
to building on the existing strengths of the program as well as the pursuit of new and
innovative approaches.
3. Fee-in-Lieu Collections To-Date
The focus of this report is on the fee-in-lieu component of
the City’s program. It is useful to understand the extent
of fee-in-lieu collections to this point and the manner in
which those fees are used to produce housing.
The City of Aspen’s “150 Fund” reflects the revenues and
expenditures related to affordable housing development
that is not specifically created for City employees. The
primary revenue streams include a sales tax dedicated
to affordable housing; a real estate transfer tax that
supports affordable housing development; sales of
developed units; investment income; lease revenues; and
germane to this study, fee-in-lieu collections.
Expenditures, including but not limited to fee-in-lieu collections,
have included land acquisitions, construction costs, financing
support, maintenance and renovation costs.
Over time – and as a direct consequence of the policies related to
fee-in-lieu and the AHC program – the relative importance of fee-in-
lieu to the 150 Fund has declined.
In 2011, collections ($2.925M) made up nearly 30% of the total
revenue ($9.752M) of the 150 Fund. In 2018, this percentage had
dropped to just less than 3% with collection ($363K) contributing
negligibly to the total revenue ($12.324M).
“150 Fund” Revenue Sources
Sales Tax
Real Estate Transfer Tax (RETT)
Fees-in Lieu
plus Proceeds from:
Unit Sales
City Investments
City-held Leases
Recent “150 Fund”
Expenditures
Land Acquisition
Construction Costs
Financing Support
Maintenance &
Renovation
20
13
DRAFT - FOR DISCUSSION ONLY
II. IntroductIon
A. HiStory And overvieW of AffordABle HouSing progrAm
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
4. Status of the Affordable Housing Credits Program
The following table reflects the status of the Affordable Housing Credit (AHC) program since
its inception in 2010. It is important to note that all figures have been converted to the
Category 4 level of affordability for the purposes of a consistent analysis.
Total Credits
Generated to date
Credits Extinguished to
date
Credits Remaining/
Not Extinguished to
date
Approved Credit
Generating Projects
–
Not Complete
These credits
were generated
by the building
of new, deed
restricted
affordable
housing units or
the buy down of
free-market units
and conversion
to deed restricted
units.
There have been
commercial and
free market, multi-
family that have
extinguished credits,
but a significant share
has been extinguished
for the development/
redevelopment of single
family residential and
the removal of ADUs.
There are a few
certificates in large
denominations,
but many of the
remaining credits are
in smaller increments
resulting from the use
of fractional or partial
credits.
There are three
projects that have
full land use approval
and are awaiting
issuance of a building
permit. They are:
404 Park
834 W. Hallam
210 W. Main
93.35 FTE 54.74 FTE 38.61 FTE 109 FTE
One of the difficulties in evaluating the market for affordable housing credits is understanding
the role of timing.
Due to low building permit issuance for new nonresidential projects in recent years, the
extinguishment of certificates has been gradual and dependent on single-family development
and redevelopment. However, there are several large-scale commercial projects that are in
the development pipeline at various stages of land use approval and building permit review,
which City staff expects to seek AHC credits to meet GMQS mitigation regulations. As shown
above, 38.61 FTE credits are outstanding and held by private parties. Today, this represents
the extent of affordable housing credits available on the free market.
21
14
DRAFT - FOR DISCUSSION ONLY
II. IntroductIon
B. HiStory of tHe fee-in-lieu progrAm
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
If these commercial projects progress towards
completion, the availability of credits for required
mitigation will come into question soon.
The sum of remaining credits that have not been
extinguished and of approved credits projects that are
not yet complete, provide a potential credit supply of
roughly 130 FTE – Category 4. When Lift One Lodge
and Gorsuch Haus are completed – those projects
combined will require roughly 61 FTE, Category 4.
B. HISTORY OF THE FEE-IN-LIEU PROGRAM
1. Fee-in-Lieu: 1985-2015
The earliest days of Aspen’s efforts to respond to the community’s affordable housing needs
required the provision of constructed units – either on-site or off-site. In 1985 or 1986,
Pitkin County and the City first instituted the fee-in-lieu per FTE (full-time equivalent) as an
alternative tool in the provision of affordable housing. At the reduced costs of building in the
mid-1980’s, the collected amounts would likely have provided only a partial supplement to the
development of needed affordable housing units.
In the mid-1990s, fee-in-lieu calculations were established using actual costs from affordable
housing developments that had been completed in the Aspen area. Importantly, land costs
were included in these figures – and consequently, there were significant increases to the fee-
in-lieu as land values began their rapid rise.
In 2001, a new schedule was implemented that represented the largest increase to fee-in-lieu
to date – a 50% increase from 1999 figures.
From 2001 through 2015, no new calculations were considered, rather, fee-in-lieu amounts
were increased annually using the Consumer Price Index (CPI) or 3% - whichever was greater.
In 2012, the City had a new fee-in-lieu study completed by RRC Associates and Rees
Consulting to evaluate various methods for calculation of housing mitigation fee-in-lieu
rates and annual adjustments into the future. After much discussion with Council and
consideration of several methodologies (that provided a full range of fee-in-lieu figures), a new
fee-in-lieu schedule was adopted in October of 2015.
The methodology behind this calculation blended the inclusion of historic land costs for the
City in acquiring land for affordable housing projects – and estimated future construction
costs of four projects planned at that time – Burlingame Phase 2B, 802 W. Main, 517 Park
Circle and 488 Castle Creek at an assumed density of 62.5%. Since these projects had not
yet been constructed, these costs for the fee-in-lieu were projected estimates only.
Today, there are approximately
38 affordable housing credits
available in the private market.
An additional 109 credits are
anticipated upon completion of
2 pending affordable projects.
Projects are pending today that
will demand about 61 credits.
22
15
DRAFT - FOR DISCUSSION ONLY
II. IntroductIon
B. HiStory of tHe fee-in-lieu progrAm
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
As part of the 2015 adoption, it was determined that future updates to the fee-in-lieu would
be calculated using a construction cost index provided by the Engineering News Record
(ENR). In February 2018, using national rates from the ENR – the fee-in-lieu schedule was
increased by 7%. The current fee-in-lieu schedule (based on the 2018 update) follows:
Per FTE: Category 1 - $381,383.31
Category 2 - $342,599.02
Category 3 - $306.549.65
Category 4 - $238,687.04
Category 5 - $168,289.60
Category 6 - $142,114.19
Category 7 - $111,438.36
2. The Affordable Housing Credit Program
In 2010, the City of Aspen, working with local developer Peter Fornell, created a unique
program to encourage the involvement of the private development community in the creation
of affordable housing units. While Aspen had been a leader in the development of employee
housing since the late 1970s, the Affordable Housing Credit (AHC) program launched Aspen’s
housing program in an entirely new direction. This program is dependent on three central
ideas.
First is the idea (and therefore the necessary direct nexus) that the building of any new square
footage generates new employees and the need to house employees. Second, Aspen has a
long-established history of requiring developers to mitigate for this generation of employees
when new development occurs. Lastly, through a series of studies over the years, Aspen
has established a codified dollar figure of what it costs to create housing for each employee
generated.
With this necessary foundation in place, the basic idea of the AH Credit program is simple: if
a developer creates an approved, deed restricted affordable housing unit, a credit is issued to
the developer that can then be sold, on the private market, to another developer who uses the
credit to provide required mitigation for employee generation on a separate project.
The value of the credit, which can be sold on the free market, becomes an important revenue
stream to the builder of that unit (as the initial credit-holder), to supplement future rental
or sales income. Each of these revenue sources increases the financial viability of private
parties developing affordable housing units. Since the creation of the AHC program, the
AHC program has been an important tool in adding to the deed-restricted, employee housing
stock in Aspen even as employee units continue to be generated through other available
alternatives, as well.
INTRODUCTION
23
16
DRAFT - FOR DISCUSSION ONLY
II. IntroductIon
B. HiStory of tHe fee-in-lieu progrAm
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
3. Public and Private Revenues through Fee-in-Lieu and Credits
Today, revenues from the fee-in-lieu program fund the City’s housing construction efforts.
Revenues from the credit program flow directly to the private sector builder of affordable
housing. No fee-in-lieu monies are provided directly to the private parties developing
affordable housing for credits. The fee-in-lieu and AHC program are two distinct alternatives
to providing built affordable housing under the GMQS.
However, in 2010 and even more restrictively in 2015, the City Council established a
maximum threshold for the use of fee-in-lieu by right. Today, that threshold is 0.1 FTE. This
means that a development that generates less than 0.1 FTE can opt for the fee-in-lieu option
by right, without going to the Planning Commission or City Council for approval.
To give a sense of what kind of development would remain under this threshold – a residential
remodel that adds 600 square feet of floor area would require 0.096FTE and would be allowed
to pay by right. Development beyond the 0.1 FTE threshold would be required to extinguish
affordable housing credits – or provide on-site or off-site units – to mitigate under the GMQS,
unless it received approval by City Council to use fee-in-lieu.
If a project will create greater than 0.1 FTE and wishes to exercise this compliance option,
there is a path provided by the Land Use Code to do so and requires a public hearing
and City Council action. However, since Council has preferred mitigation that results in
constructed units more quickly, the criteria for receiving Council approval are limited to
showings of impracticability and good-faith efforts to achieve other options. To date, no
applicant creating greater than 0.1 FTE has pursued approval by the City Council.
Combined, these provisions work to create the value behind the AHC program and the
incentive for private developers to pursue affordable housing projects for which the City will
issue credits.
Lastly, in describing the relationship between fee-in-lieu and the credits program, it is
interesting to note that despite their distinctive roles and legal status, anecdotally, it appears
the sales price for credits in the market has roughly tracked City-adopted fee-in-lieu amounts.
It is not entirely clear what has caused this outcome, since the two components are not tied
together in the market under any City regulations. It
is the case, however, that nonresidential developers
subject to GMQS mitigation regulations, may view
the fee-in-lieu as a readily available alternative to
purchasing credits – whether that is true or not – and
this has had the impact of reducing demand for credits
at higher prices.
In any case, there has been a sense or expectation
among some that the amount of the fees-in-lieu being
paid should also remain closely tied to the current actual costs to develop affordable housing,
since the credit values are an important component of the incentive to private developers in
choosing to build affordable rather than free-market units in the community.
INTRODUCTION
Some believe it important that
fee-in-lieu track closely to
private market credits and that
maintaining up-to-date, localized
construction costs is critical to
doing so and for sustaining private
market participation in the City’s
affordable housing efforts.
24
17
DRAFT - FOR DISCUSSION ONLY
II. IntroductIon
c. report oBjectiveS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
C. REPORT OBJECTIVES
The City Council has directed staff to assess the current legal and methodological status of
the City’s existing affordable housing program. The objectives of Council are to seek ways
of increasing affordable housing production and availability, by evaluating methodological
alternatives, updating and localizing construction and land costs, and providing guidance
regarding the role of fee-in-lieu in its overarching efforts and the relationship between fee-
in-lieu and affordable housing credits. It is also
important that applicable processes be transparent,
easy-to-follow, and fair.
To meet these objectives, we have reviewed and
evaluated other housing mitigation programs in
Colorado and around the country, allowing us to
offer alternatives for the City’s consideration, both as
to policy and methodology. Of those reviewed, we
have set out a detailed description of 6 programs that
face affordable housing crises similar to Aspen’s and
which give a range of alternative ways of addressing
them. These are set forth in Appendix B.
Based on these “case study” evaluations, we have
prepared then set forth policy and methodological recommendations for the City to consider
in its efforts to increase affordable housing availability. The case studies are set forth in the
section below. Following those, is are the discussions of the current and recommended
methodological and policy-based aspects of the City’s fee-in-lieu program.
Objectives
Increase Affordable
Housing Availability
Ensure Methodology is current,
defensible, and Aspen-specific
Annual Adjustments should
reflect total costs and be easy
to administer
Clarify Relationship between
fee-in-lieu and Credits
25
METHODOLOGY ISSUES
AND RECOMMENDATIONS
26
19
III. METHODOLOGY ISSUES AND
RECOMMENDATIONS
A. METHODOLOGY OVERVIEW
The fee-in-lieu is one of several options allowed by the City’s GMQS to mitigate affordable
housing obligations generated by the development of market rate residential and
nonresidential development. Mitigation measures are described in the Aspen Pitkin County
Housing Authority (APCHA) Guidelines as follows:
The APCHA Board has prioritized affordable housing mitigation options available to private
sector property developers in the following order:
1. On-site deed-restricted housing units
constructed or converted next to or attached
to the proposed development.
2. Off-site deed-restricted housing units
constructed or converted at a separate
location within the Aspen core subject to
approval by APCHA. A single off-site deed-
restricted unit in an otherwise free-market
housing complex shall not be approved.
3. Use of the Affordable Housing Credit Program.
4. APCHA approved buy-down units.
5. Payment-in-lieu to the city or payment of an Impact Fee to the county; or Land-
in-lieu by conveyance of vacant property to the city or APCHA, permitted on a
case-by-case basis.8
The third option, the Affordable Housing Credit Program, allows the City to issue credits to
private developers of affordable units, based on the number of FTEs that can be housed by
the affordable units they construct. The developer can then sell the credits issued by the
City to developers of market rate housing or commercial floor area, so they may mitigate the
demand for affordable housing needs that their projects have created.
As shown above, the payment of a fee-in-lieu is the fifth preferred option, where mitigation
that results in housing units getting built in the near term is preferred over monetary
contributions for future housing construction. Fee-in-lieu is most frequently used by
developers mitigating less than 0.1 of an FTE, likely due to the fact that fee-in-lieu is accepted
in this situation by-right, while developments creating 0.1 FTE or more may elect to mitigate
using fee-in-lieu only by special request to the City Council (see § 26.470.110, Land Use
Code).
8 APCHA, “APCHA Employee Housing Guidelines,” June 2019, p. 14; available at https://www.apcha.org/
DocumentCenter/View/1225.
While the primary objective
of updating the fee-in-
lieu is to address cost and
revenue assumptions, the
City also should revisit
other components, including
employee generation rates,
mitigation rates, and
occupancy standards.
27
20
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
B. current fee-in-lieu
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Finally, in order to provide context for the discussion in this section, we have provided the
following representation of the recommended fee-in-lieu calculation as follows:
Components of the formula shown in orange above reflect variables that, if changed, would
impact the fee-in-lieu amounts (see Methodology Recommendation #6, in section III(D)).
These variables will be revisited and confirmed during the Task 4 full fee study update.
B. CURRENT FEE-IN-LIEU
1. The 2015 Update to the Fee-in-Lieu
The current methodology originated with a 2012 study by RRC/Rees that identified several
calculation options.9 The calculation options were modified over subsequent years by City
staff until the current methodology was established in 2015. The fees were calculated by
estimating the City’s actual costs to construct an affordable housing unit, less the estimated
revenue to be received by the developer of the affordable housing for the unit. The specific
calculation of the fee-in-lieu, however, included a range of assumptions to arrive at the 2015
schedule.
9 RRC Associates, Inc. and Rees Consulting, Inc., “Affordable Housing Fee Methodology, City of Aspen/Pitkin
County/APCHA,” December 2012. It should be noted that the recommendation from the RRC study was to
use the Market-Affordability Gap Methodology, which ultimately was not used in the fee-in-lieu calculation
adopted by City Council.
28
21
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
B. current fee-in-lieu
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
The City’s current Fee in Lieu schedule is based on:
1. the difference between the City’s total development costs of an affordable
housing unit and
2. the deed-restricted sale price or rental revenue stream to the City anticipated
from the unit. Revenue varies by APCHA affordable housing unit category by
household income levels.
Referred to here as a “Cost-Driven Approach,” the methodology also is referred to in the
practice as an “Affordability Gap Approach.” The difference between development costs and
the developer’s return on the unit by rent or sale, is the basis for the fee-in-lieu and is often
referred to as the “subsidy.” It is simply the gap between the City’s cost to develop and the
revenue received. Fee-in-lieu amounts are expressed per full-time equivalent (FTE).
The Growth Management Quota System (GMQS) chapter of the City of Aspen Land Use Code
describes the methodology and assumptions on which the fee is calculated:
The subsidy per FTE was calculated by subtracting unit sales revenue per FTE
from the total development costs per FTE. Total development cost per FTE was
determined by using an average of recent City of Aspen projects and foreseeable
future City of Aspen projects for which land has already been acquired and
program/density has been deliberated, where in each case actual land costs
were used in the calculation. The Program/Density projections for future projects
were based upon assumptions suitable for the respective neighborhood, public
outreach, and program/density review by City Council. Development cost
calculations included all “hard” and “soft” costs associated with development.
(Sec. 26.470.050 [E]).10
Several alternative approaches were considered during the 2015 analysis, including a
combination of factors such as: sample affordable housing projects, densities, historic costs,
assessed values, and market values. Ultimately, estimated construction costs and historic
land costs from four City affordable housing projects were used. At the time, the City had
already purchased land for the four housing projects, therefore costs reflected actual costs
for land acquisition. However, the housing projects were in the design stage therefore
construction costs and densities (i.e., the number of units and bedrooms to be delivered) were
estimated.
The projects used to calculate the fee-in-lieu were:
»Burlingame Phase 2B/3
»802 West Main
»517 Park Circle
»488 Castle Creek
10 City of Aspen Land Use Code § 26.470.050(E).
29
22
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
B. current fee-in-lieu
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
The fee-in-lieu, also referred to as the subsidy, resulting from the City’s Cost-Driven Approach,
per FTE, was calculated as:
Total City Cost to Develop – Sales Revenue or Operating Income to the City (Yrs 16-50)
= Total Subsidy
and
Total Subsidy / FTE
= Fee-in-Lieu per FTE
Where:
Total City Cost equals land acquisition cost and construction costs (including
soft costs)
Sales Revenue or Operating Income is revenue from the sale of the affordable
unit or rent revenue less first mortgage, operating expenditures, and capital
maintenance expenditures. Rent revenue is calculated to reflect years 16-50
of the life of the unit by unit category with years 1-15 the unit is assumed to be
operated by the developer of the unit.
FTE is the number of FTEs housed in the development
The calculation was applied to each category of housing unit and the subsidy amount per FTE
became the amount of the fee-in-lieu for each unit category (i.e., Category 1 through Category
7 units).
The resulting schedule, adopted in 2015, ranged from
$320,186 per FTE for a Category 2 housing unit to a low of
$223,072 per FTE for a Category 4 housing unit.11
11 Categories 2 and 4 are the units used most often to mitigate affordable housing requirements. Additional
income categories 5-7 were provided in the fee schedule but are “proposed to exist solely for the purpose
of converting affordable housing mitigation credits.” . . . And “cannot be used for purpose of accepting fee-
in-lieu payments for housing mitigation” (R. Barry Crook, Assistant City Manager, Memo to Mayor and City
Council, “Fee in lieu History and Current Status,” October 16, 2018, p. 8.). See also § 26.270.050(F) allowing
for the conversion between “number of employees” requirements and square footage requirements.
Fee-in-Lieu Amounts
Calculated in 2015
Category 2: $320,186
Category 4: $223,072
As updated, as of 2020
Category 2: $342,599
Category 4: $238,687
30
23
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
B. current fee-in-lieu
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
2. 2018 Adjustment to the Fee-in-Lieu
In 2018, the City updated the amount, pursuant to section § 26.470.050(E), Land Use Code,
which allows the City to update the schedule annually based on the Engineering News
Record inflation index.12 The Engineering News Record (ENR) is a professional publication
of the construction and engineering sectors. ENR maintains the nationally-recognized
Construction Cost Index (CCI), which tracks national and regional construction cost trends.
Based on the 2018 update, current fee amounts range between $342,599, for a Category 2
unit, and $238,687, for a Category 4 unit.
During the 2018 update, staff provided two options for cost adjustments, based on the ENR
CCI:
»4.5%, based on the Denver ENR CCI Index; and
»7%, based on National ENR CCI.
Council adopted increases to the schedule based on the National ENR CCI at 7%. The
current schedule, per new FTE required to serve new development, is shown in Figure 1
below.
Figure 1. Current Fee in Lieu Schedule
CURRENT FIL SCHEDULE ($ per FTE)
Category 1:$381,383.31
Category 2:$342,599.02
Category 3:$306,549.65
Category 4:$238,687.04
Category 5:$168,289.60
Category 6:$142,114.19
Category 7:$111,438.36
APCHA housing categories are established according to household income levels. Current
income target limits are shown below in Figure 2. Free-market residential development
is expected to mitigate with Category 2 units (or lower) and commercial development is
expected to mitigate with Category 4 units. In practice, it is our understanding that unit
category designation can be negotiated between the City and the developer. Category
designation determines the price at which a unit sells or rents thereby affecting a
development’s pro forma.
12 Under the same subsection of the ordinance, the City Council conducts a full update to the schedule every
five (5) years.
31
24
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
B. current fee-in-lieu
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 2. APCHA Household Income Target Levels per Housing Category
APCHA Housing Target Household Income Level AMI Percentage Range
Category 1 Low-Income Below 50% AMI
Category 2 Lower Moderate Income 50.1 - 85% AMI
Category 3 Upper Moderate Income 85.1 - 130% AMI
Category 4 Middle Income 130.1 - 205% AMI
Category 5 and RO Upper Middle Income 205.1 - 240% AMI
Note: Categories 6 and 7 have been eliminated and incorporated into category 5.
Source: APCHA Employee Housing Guidelines, June 2019.
Fee-in-Lieu collections are deposited and maintained in the City’s Fund 150 Affordable
Housing Fund. From 2010 to 2018, almost $116 million has been collected from revenue
sources in that fund. Of that amount, approximately $10 million is fee-in-lieu revenues,
reflecting approximately 9 percent. The figure below shows annual total revenue collected in
the fund along with the share from fee-in-lieu collections.
32
25
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
C. METHODOLOGY ISSUES
The current fee-in-lieu in the City of Aspen has faced some
criticism, including that the fee-in-lieu:
1. Does not capture the full costs to construct
affordable housing units in the City of Aspen
2. Does not adequately reflect current land costs
in Aspen
3. Does not include an annual adjustment method
that sufficiently tracks changes in the Aspen
market
As part of the current effort, the City has posed 4 specific
questions regarding the fee-in-lieu program, its effectiveness, and its relationship with the
AHC Program, which was created in 2010.
METHODOLOGY ISSUE # 1:
Whether the current methodology for calculating the fee-in-lieu adequately
captures the full and total cost impact to provide affordable housing in the
City of Aspen?
METHODOLOGY ISSUE # 2:
Whether the cost components in the fee-in-lieu calculation need to be
adjusted to reflect costs specific to Aspen’s construction market?
METHODOLOGY ISSUE # 3:
Whether an alternative methodology for calculating the annual fee
adjustment may more accurately reflect increases in construction costs in
the area?
METHODOLOGY ISSUE # 4:
Whether the current fee-in-lieu affects the market and sustainability of the
Affordable Housing Credit System? Is the fee-in-lieu amount reflective of the
actual cost to deliver affordable housing by the private sector?
This section addresses each methodology issue in turn.
This Report provides
guidance to inform the City’s
next update to its fee-in-lieu
schedule. It does not include
an updated fee calculation.
The amount of an updated
fee-in-lieu can only be
determined after a full study
is completed.
33
26
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
1. Whether the current methodology for calculating the Fee in Lieu adequately
captures the full cost impact to provide affordable housing in the City of As-
pen?
a) Discussion
One key question regarding the fee-in-lieu is determining how to ensure all costs associated
with the development of affordable housing are captured. Three things are important to note
here.
First, the full calculation of a fee-in-lieu takes into account factors other than costs; for
example, additional revenues that will offset some costs. This report addresses costs. The
full fee-in-lieu or “nexus” study update will use the cost recommendations of this study to
develop a fully updated fee-in-lieu amount.
Second, since the City is using fee-in-lieu revenues to build housing – and not the private
sector – the “full costs” of building that housing reflects the costs the City is likely to incur in
doing so. These may or may not vary significantly from the costs the private developer incurs,
which is discussed below.
Third, as will be discussed more thoroughly in Section IV regarding policy and legal issues,
the legal standards applicable to fees-in-lieu (or “impact fees,” or “exactions”), while generally
consistent, do contain subtleties, which may impact the methodology ultimately used by
the City to update the fee-in-lieu. In addition, as noted in Section IV, the courts, have been
inconsistent in the application of legal standards, terminology, and the standards applied in a
given case, and the reasons for applying that standard.
In any case, the costs to build affordable units is the principal component of all commonly-
used methodologies, including those used throughout Colorado.
Several methodologies can be used to calculate an affordable housing impact fee or fee-in-
lieu. Though perhaps distinguishable from statutory definitions of a “capital facility,” the cost
components used to calculate an affordable housing impact fee or fee-in-lieu are in many
ways consistent with those used for most traditional impact fees. The key difference is that
affordable housing units might be considered as the “facility” to be provided with the fees
collected. The requirements for impact fees are:
Demonstrate an Impact: All new development in a community creates
additional demands on some, or all, public facilities provided by local
government. If the supply of facilities is not increased to satisfy that additional
demand, the quality or availability of public facilities for the entire community will
deteriorate.
Demonstrate Proportionality: The requirement that exactions be proportional
to the impacts of development was articulated first by the U.S. Supreme Court
in the Dolan v. City of Tigard case, in 1994. Proportionality in a fee calculation is
34
27
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
established through the procedures used to identify development-related facility
costs, and in the methods used to calculate impact fees for various types of
facilities and categories of development. The demand for facilities is measured
in terms of relevant and measurable attributes of development.
Demonstrate Benefit: A sufficient benefit relationship requires that fee revenues
be segregated from other funds and expended only on costs associated with
the facilities for which the fees will be charged. Fees also must be expended in a
timely manner and the facilities funded by the fees must serve the development
paying the fees. However, payment of an impact fee does not require that the
facilities funded with fee revenues be available exclusively to development
paying the fees but provide a proportionate benefit to the service area where the
fees were paid.
In any case, most methodologies consider compliance with the above requirements as a
rough prerequisite to calculating a housing impact fee or fee-in-lieu.
Two main methodologies are typically used to calculate affordable housing fees:
Market-Affordability Gap: This approach bases the fee calculation on the
difference between the market price of housing and the price that is affordable
to households with incomes being served by the locality’s affordable housing
program. The second piece, the “affordable price,” is based on income levels
and homeowner/renter cost assumptions (e.g., percent income to be spent on
housing costs, mortgage interest rates, etc.), and varies by income level and
household size. The affordable price (sales or rental income) reflects revenue
back to the locality to offset the cost to provide the housing. However, by
definition, the revenue generated from the sale or rental of the unit is artificially
constrained, therefore creating a gap. (This was the methodology used in the
2012 RRC/Rees Study.13)
Cost-Driven Approach14: This approach bases the fee calculation on the
difference between total costs to develop a housing unit and the price that is
affordable to households with incomes being served by the locality’s affordable
housing program. The “affordable price” would be the same as described
above; derived from income levels and homeowner/renter cost assumptions
(e.g., percent to be spent on housing, mortgage interest rates, etc.), and varies
by income level and household size.
13 RRC Associates, Inc. and Rees Consulting, Inc., “Affordable Housing Fee Methodology, City of Aspen/Pitkin
County/APCHA,” December 2012.
14 It is noted that where a methodology is labeled as “cost-driven” in this document, others may use the term
“affordability gap” methodology. However, to simplify the discussion here, we relabel this methodology as
“cost-driven” to distinguish between the 2012 RRC/Rees methodology, called “Market-Affordability Gap,”
and the methodology that uses total development costs as the basis to derive affordable housing fees,
which is the fee the City current uses and which is recommended here.
35
28
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
The affordable price (sales or rental income) reflects revenue back to the locality
to offset the cost to provide the housing. A “gap” is created since, by definition,
the revenue generated from the sale or rental of the unit is artificially constrained
through a deed-restriction. In this case, the gap is the difference between the
cost to build the housing unit and the revenue received.
However, in the case of the City acting as developer, it should be noted that there may
be other revenue sources other than future sales or rental income, which may fill the
gap in some localities: or in other words, a mechanism to further reduce the cost of
development in the first place, such as tax credits. (The cost-driven approach is the
methodology used for the City of Aspen’s current fee-in-lieu.)
In both of the above methodologies, revenues and cost reductions achieved by the developer
of the housing (in this case the City) typically offset a portion of the costs to provide affordable
housing. This could occur during the development stage (if the City can secure a low- or
no-interest loan, for example) and/or during the conveyance stage (that is, the revenue from
the sale or rental of the unit that accrues to the City). Examples of offsetting revenues/cost
reductions include, but are not limited to:
1. Sales revenue
2. Rental revenue
3. Tax credit funding
4. Grants
5. Land donation or contributions from the public or non-profits
6. Low or no interest loans
7. Land banking
8. Lower carrying costs
The City of Aspen’s fee-in-lieu includes assumptions on reduced development costs as well
as revenue to the City from sales or rental income.
b) Recommendation
Based on our analysis, the “cost-driven” methodology, which is used to calculate the City of
Aspen’s current fee-in-lieu remains an appropriate means of capturing the full net cost for the
City to provide affordable housing. It captures the City’s cost to develop affordable housing
units, accounts for a revenue stream to the City from sales, rentals, and other sources that
offsets those costs, and results in the cost gap to be mitigated by the demand created from
market rate development.
Note, however, since the City’s current fee-in-lieu was based on estimated costs in 2015, it is
recommended that the City complete a full nexus study update based on current actual costs.
36
29
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
2. Whether the cost components in the fee-in-lieu calculation need to be ad-
justed to reflect costs specific to Aspen’s construction market?
a) Discussion
(1) Cost Assumptions: Current Fee-in-Lieu
The City of Aspen’s current fee-in-lieu reflects the City’s estimated cost to build an affordable
unit minus the estimated future cash flow received from the occupant of the unit. The resulting
fee-in-lieu calculation was an average from multiple
City affordable housing projects, also referred to as the
“subsidy” per unit (total City construction costs minus
revenue received by the City from the sale or rental of the
unit).
For purposes of this analysis, the City is first interested in
understanding the total cost to develop an affordable unit,
in the City of Aspen, regardless of the income received
from sale, rental, or other sources. From there, assumptions
regarding revenue can be discussed.
The total cost for City-built affordable housing on which the 2015 fee-in-lieu rates were based,
ranged from $243,966 to $543,216 per FTE (approximately $550 to $1,360 per square foot).
Costs included:
1. Land acquisition (past costs for City land purchases for affordable housing).
2. Soft costs (includes developer fee; excludes costs for City staff time).
3. Construction costs for offsite and onsite improvements and infrastructure
(includes buildings/landscape, and any other mitigation needed).
A summary is provided in Figure 3.
Construction costs per
square foot of housing
built by the City are about
40% higher today than
estimated costs in 2015
(according to the data
available at the time of
this report).
37
30
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 3. 2015 Fee in Lieu Study Affordable Housing Total Development Cost Assumptions
The above figures do not include other financial support or revenue offsets. More detail on the
City of Aspen’s fee-in-lieu calculations is provided in Appendix C: Construction Cost Detail.
(2) Connection between Cost Assumptions and how Fee
Revenues will be Spent
Important to the discussion of revising the fee-in-lieu is implementation of the fee-in-lieu,
including the anticipated use of the funds that are collected.
As noted above, most required housing mitigation in the City of Aspen is provided through
on-site and off-site mitigation by the developer creating the need for affordable housing or
by a private developer of affordable housing through the issuance, sale, and extinguishment
of affordable housing credits. However, if fee-in-lieu were to be more widely used, resulting
in higher fee-in-lieu collections, the City would have an increased role in providing the City’s
affordable housing.15 Such a shift may also impact the recommended methodology to align
with the use of the funds, if those fee revenues, for example, were used to subsidize private
sector affordable housing projects. That moves the City further along the spectrum towards
an out-right housing impact fee, like Pitkin County’s.
15 It should be noted that collections are not currently used to fund private sector affordable housing projects in
the City of Aspen.
38
31
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
In short, the fee must be calculated based on the intended end use of the fee revenues.
If fee revenue is desired to be used to directly fund land acquisition and construction of
affordable housing by the City, then the fee calculation should reflect City costs for land
acquisition and construction, as opposed to private sector costs. For example, this may
reflect the City’s ability to landbank as well as purchase land outside current City limits for
future annexation, options that may not be available to the private sector.
On the other hand, if the City elects to start using fee revenue to directly support private
developer delivery of affordable housing, then the fee calculation should reflect private sector
costs for land acquisition and construction. This may reflect a different set of circumstances
regarding land purchases and construction costs.
(3) Cost Assumptions: Updated Fee-in-Lieu
Since Aspen’s fee-in-lieu is assumed to continue to help fund the construction of affordable
housing by the City, the cost components for the fee-in-lieu should reflect current
development costs the City is anticipated to incur. To ensure an Aspen-specific cost structure,
the objective for the fee update is to get as close to actual total development costs as
possible, based on Aspen data.
General cost component categories should include the same components as in the current
fee-in-lieu:
1. Land acquisition
2. Soft costs16
3. Construction costs
The City of Aspen and the consultant team interviewed public and private affordable housing
developers to obtain current land and construction costs associated with affordable housing
projects in the City. Gathering data on private sector land acquisition and construction
costs is inherently challenging. As part of this study, we offered stakeholder developers the
opportunity to provide cost estimates, but, only one sample project was received. 17
However, the City of Aspen provided updated actual (versus 2015’s estimated) development
costs for the same projects used to develop the current fee-in-lieu.18 Results are discussed
below and shown in Figure 4.
16 While the soft cost category in the current City of Aspen’s includes a “developer fee,” it does not explicitly
capture the cost for City personnel and other overhead costs.
17 To establish common definitions for development cost components, TischlerBise compiled a development
cost worksheet with a detailed list of cost categories to help guide collection of local development data.
While the worksheet was not utilized in this analysis, it is provided in the Appendix E of this report for
potential use in ongoing data collection in Task 4.
18 Burlingame 2B is not included in the updated costs because it is not yet completed. (Note: Burlingame 2B is
now referred to as Burlingame 3)
39
32
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
1. Land costs reflect what the City paid for the parcels and therefore are the same
line item totals as included in the 2015 fee-in-lieu. However, because the net
square footage of the projects have changed from the 2015 calculation, the cost
per square foot has changed. Further discussion on land costs is provided in the
following section. Land costs per square foot range from $312 to $543. Updated
construction costs range from $743 to $903 per square foot, reflecting all other
costs except land acquisition.
2. Total costs for all cost components (without revenue offsets for sales, rentals, or
other financial support that may be available to the City) per square foot range
from $1,055 to $1,445. The cost per FTE ranges from $388,245 to $561,628.
3. From 2015 estimates to their now-known actual costs, costs per square foot
have increased almost 40 percent while costs per FTE have increased almost
30 percent. Note: the percent increases differ because the development plans
changed somewhat from 2015 to actual, which affect the net square footage
and number of FTEs to be housed.
Figure 4. 2020 Updated Affordable Housing Total Development Cost Assumptions
(4)
2015 FIL:
Estimated to be
Built in 2017*
Actual 2020
2015 FIL:
Estimated to be
Built in 2018*
Actual 2020
2015 FIL:
Estimated to be
Built in 2019*
Actual 2020 2015 FIL Actual 2020
Land Cost $3,690,000 $3,690,000 $4,105,000 $4,105,000 $5,400,000 $5,400,000
Construction Cost $3,948,977 $6,138,497 $5,445,102 $6,787,153 $12,067,607 $12,847,507
Total Cost $7,638,977 $9,828,497 $9,550,102 $10,892,153 $17,467,607 $18,247,507
Total Cost % Increase 29%14%4%
Sq. Ft. (Net)5,625 6,800 9,036 7,950 22,434 17,300
Land $/Sq. Ft. $656 $543 $454 $516 $241 $312
Construction $/Sq. Ft. $702 $903 $603 $854 $538 $743
Total $/Sq. Ft. $1,358 $1,445 $1,057 $1,370 $779 $1,055 $937 $1,290
Cost per Sq. Ft. % Increase 6%30%35%38%
FTEs 14.06 17.50 22.59 21.25 56.09 47.00
Total $/FTE $543,216 $561,628 $422,746 $512,572 $311,444 $388,245 $380,343 $487,482
Cost per FTE % Increase 3%21%25%28%
* Estimated costs used in City of Aspen Fee In Lieu calculation in 2015 (October 12, 2015, Council Memo).
Sources: City Council Memo, October 12, 2015; City of Aspen.
AVERAGE802 West Main 517 Park Circle 488 Castle Creek
Further Discussion on Land Costs
Land cost comparisons are provided in this section to highlight the range of costs for land
acquisition in the City of Aspen. Two sets of comparisons are provided—costs per FTE (where
FTEs are known) and costs per square foot (reflecting the gross parcel size) from three sets of
land purchases—City land purchases for affordable housing in 2008, recent land acquisition
for affordable housing projects, and recent arms-length vacant land sales in the City of Aspen
obtained from Pitkin County Assessor data.
40
33
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
1. Costs per FTE range from approximately $70,000 (404 Park) to $210,000 (802
West Main).19
2. Costs per square foot range from $150 (488 Castle Creek) to $590 (average
arms-length vacant land sales in City of Aspen
Additional detail on land acquisition costs is provided in Appendix D: Land Acquisition Costs
Detail.
Figure 5. Land Acquisition Cost per FTE
19 FTEs are not estimated for average arms-length vacant land sales data.
41
34
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 6. Land Acquisition Cost per Square Foot
b) Recommendation
Based on our analysis, the cost components included in the City of Aspen’s current fee-in-
lieu are appropriate and reflect the cost elements to provide affordable housing in the City of
Aspen specifically. These should be carried forward during the City’s next fee update.
However, we also recommend the City separate land acquisition costs from construction
costs in an updated fee-in-lieu calculation. This will allow the City to (a) adequately capture
current costs in the update based on actual or estimated land acquisition costs and (b)
annually update land costs separately from construction, which are likely to change at
different rates. Annual update recommendations are set out below.
Second, the City should consider including its labor costs for staff time, overhead, and other
costs necessary to create affordable housing in the fee-in-lieu update, thus aligning with
comparable cost categories for private sector affordable housing development. This is an
area that is unsettled in the law so should be coordinated with the City Attorney at that time.
42
35
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
3. Whether an alternative methodology for calculating the annual fee adjust-
ment may more accurately reflect increases in construction costs in the
area?
a) Discussion
In addition to its recurring full study updates, the Land Use Code (Section § 26.470.050(E))
allows the City to adjust the fee-in-lieu schedule each year, to reflect ongoing changes in
construction and costs, based currently on the Engineering News Record inflation index.
The Engineering News Record (ENR) is a professional publication of the construction and
engineering sectors. ENR maintains the nationally-recognized
Construction Cost Index (CCI), which tracks national and
regional construction cost trends.
In 2018, City staff provided two options for cost adjustments
using ENR CCI from two geographies: 4.5 percent based on
the Denver ENR CCI and 7 percent based on the National
ENR CCI. The Council adopted the latter.
The National ENR CCI is an index that aggregates data from 20 cities, including Denver.20 The
dataset also provides disaggregated figures for each of the 20 cities individually. ENR notes
that it is more appropriate to use the 20-city average index than a single-city index closer to
the locality. Because the national index has more elements, it has a smoother trend, while
indexes for individual cities are more susceptible to price spikes.21
Other construction cost indexes and estimators are available such as:
1. American City and County Municipal Cost Index, which is a national index
developed specifically for local government costs with several components,
including the Municipal Cost Index (MCI), which covers all public costs and
a Construction Cost Index (CCI). (https://www.americancityandcounty.com/
municipal-cost-index)
2. R.S. Means/Gordian is a construction cost estimating service/database. The
data is available for individual cities and regions as well as national averages.
The data is published on an annual basis however, it does not publish a separate
cost index. An annual increase would need to be calculated given the data
20 The 20 cities are: Atlanta, GA, Baltimore, MD, Birmingham, AL, Boston, MA, Chicago, IL, Cincinnati, OH,
Cleveland, OH, Dallas, TX, Denver, CO, Detroit, MI, Kansas City, MO, Los Angeles, CA, Minneapolis, MN,
New Orleans, LA, New York, NY, Philadelphia, PA, Pittsburgh, PA, San Francisco, CA, Seattle, WA, and St.
Louis, MO.
21 Engineering News Record, https://www.enr.com/economics/faq.
City construction costs
per square foot have
increased roughly 8%
each year on average.
43
36
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
available. (https://www.rsmeans.com)
3. Marshall and Swift/CoreLogic is also a construction cost estimating service/
database. This data is also published annually and can be used to determine an
annual cost increase given changes in the construction market. (https://www.
corelogic.com/solutions/marshall-swift.aspx#a_Resources1)
4. Another option from the City of San Francisco (see the Case Studies in the
Appendix B) is a staff-led annual adjustment to maintain a rolling inventory of
recent affordable housing construction projects. The Mayor’s Office of Housing
and Community Development (MOHCD) is directed to update the Affordable
Housing Fee with data on affordable housing projects financed from the most
recent three-year period. New projects are added each year and older projects
outside of the three-year window are dropped.22 However, in order to be reliable,
this approach demands rigorous and ongoing data collection by staff, as well as
a sophisticated methodology to guide data collection and processing.
b) Recommendation
The Engineering News Record indices, other cost indices indicated above, and the San
Francisco approach are standard methods used to update construction costs.
Use of the Consumer Price Index (CPI) is not recommended, however, because the products
tracked in the CPI do not reflect construction costs sufficiently. And, while City staff could
follow San Francisco’s lead and track construction cost changes in “real time,” this may not
fit the Aspen environment, where there may not be enough affordable housing projects each
year to provide sufficiently reliable data for purposes of adjusting the fee-in-lieu citywide.
Also, it is not clear whether such a burdensome undertaking on staff’s part would result
in adjustment factors any more reliable than the ENR. Finally, if it is the City’s desire to
track costs for private sector affordable housing development, obtaining this data may be
challenging.
Therefore, we recommend the more straightforward and transparent approach of the City
basing its annual adjustments on ENR’s national averages, not single-city averages, which
are more susceptible to price fluctuations due to the labor market, weather, and localized or
regional trends. ENR is the most widely used index for impact fees and is therefore familiar
to the development community. According to the national ENR CCI, construction costs have
increased from 2 to almost 4 percent annually. The City of Aspen used a 3 percent escalator
22 From the San Francisco program (see Appendix B). “Pursuant to Section 415.5 and the specific direction
of the Controller and TAC, MOHCD shall update the amount of the Affordable Housing Fee each year on
January 1, using the MOHCD average cost to construct an affordable unit in projects that were financed
in the previous three years and the Planning Department’s average residential Gross Floor Area of projects
that have elected to pay the Fee and have been entitled in the same time period. Each year this analysis will
be updated to include new projects from the most recent year, and drop older projects that no longer fall
into the three year period of analysis. The updated Fee amount will be included in the Citywide Impact Fee
Register that is posted December 1 and effective on January 1.” https://sfplanning.org/project/inclusionary-
affordable-housing-program#2019-fee-update.
44
37
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
in its 2015 study to estimate future costs. A comparison graphic is shown below.
Figure 7. ENR National CCI Annual Percent Change Compared to City Escalator
Actual costs from City affordable housing projects increased by a larger amount than was
projected during the 2015 FIL Study (see Figure 4). Actual costs have increased from 4 to 29
percent over original estimates. National ENR CCI increases over the same time periods are
considerably lower with the exception of the most recent project. A summary is provided in
Figure 8.
45
38
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 8. Increases in Affordable Housing Development Costs from Original Estimate Compared to ENR
CCI
In most programs, either will sufficiently reflect the changes over the prior year, particularly if
the jurisdiction is diligent about applying the adjustment every year. As is discussed below,
the City’s adopted “mitigation rate” also may impact its approach to annual adjustments.23
4. Whether the current fee-in-lieu affects the market and sustainability of the
Affordable Housing Credit System? Is the fee-in-lieu amount reflective of the
actual cost to deliver affordable housing by the private sector?
a) Discussion
When the City added the AHC program in 2010, it created a new opportunity for the private
sector to join the City and other governmental and non-profit entities in the provision of deed-
restricted affordable housing. This provided an opportunity for the City to avail itself of the
efficiencies of the private housing market, while also taking advantage of the effectiveness
and predictability inherent in the existing public sector component.24
23 Note that, were the City to change its methodology to a Market-Affordability Approach, using residential
market values, instead of construction costs, then a house price index could be used such as: the Freddie
Mac House Price Index, which is a measure of typical price inflation for houses within the United States and
available at the Metropolitan Statistical Area (MSA), state, and national levels (http://www.freddiemac.com/
research/indices/house-price-index.page); or the Case-Shiller Home Price Indices, which include a national
home price index, a 20-city composite index, a 10-city composite index, and twenty individual metro area
indices https://www.corelogic.com/products/corelogic-case-shiller.aspx and https://fred.stlouisfed.org/
series/CSUSHPISA).
24 See City of Aspen, Land Use Code § 26.540.010 9 (“There are two main purposes of this chapter: to
encourage the private sector to develop affordable housing; and to establish an option for housing mitigation
that immediately offsets the impacts of development. A Certificate of Affordable Housing Credit is issued
to the developer of affordable housing that is not required for mitigation. Another entity can purchase such
a Certificate and use it to satisfy housing mitigation requirements. Establishing this transferable Certificate
creates a new revenue stream that can make the development of affordable housing more economically
viable. Establishing this transferable Certificate also establishes an option for mitigation that reflects built and
occupied affordable housing, thereby offsetting the impacts of development before those impacts are felt.
This Chapter describes the process for establishing, transferring and extinguishing a Certificate of Affordable
Housing Credit.”)
46
39
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Although the AHC program provides an alternative means of complying with the City’s
Growth Management Quota System, it is a distinct and separate mechanism for doing so.
Specifically, it invites the private sector to have a role in developing affordable housing in
the Town. The private sector benefit of AHC Program was its independence from the City’s
public sector efforts. In fact, section 26.540.030 of the Land Use Code specifically states:
“The market for Certificates of Affordable Housing Credit is unrestricted and the City shall not
prescribe or guarantee the monetary value of a Credit.”
In other words, the City is not part of the sale or transfer of credits after it has issued the
credit to the private sector developer of affordable housing. In fact, the City is limited to the
role of ledger-keeper. It issues the credit, it may issue revised certificates to subsequent
purchasers, and it extinguishes the credit when it is eventually submitted as mitigation.
However, the City is not aware of the prices at which the credits are offered on the free market
or the prices at which they are purchased. Therefore, under its ordinance, the City has not
“prescribed” or “guaranteed” the value of credits since they were created seven years ago.
Nonetheless, the questions have been asked: Whether the City’s fee-in-lieu program (or the
amounts of the fee-in-lieu) affects the market or sustainability of the AHC program and, if so,
does the amount of the fee-in-lieu reflect the costs for the private sector to develop?
First, it is difficult to draw a definitive and singular connection between the amount of the
City’s fee-in-lieu and the value of a free-market affordable housing credits. This is true from
both structural and economic points of view. As noted above, the structure of the program
intentionally separated the two. And, as is discussed below, from a theory of economics,
there are simply too many factors, too few transactions, and too many constraints on the
limited credit market to discern a relationship between fee-in-lieu amounts and credit values
on the private market.
Second, as is discussed under Methodology Issue # 2, the fee-in-lieu is not meant to reflect
the costs of the private sector, because the fee-in-lieu funds the City’s parallel, yet distinct,
public component. While we would expect some of categories of costs to be similar between
the public and private sectors, we were not able to gather sufficient data on private sector
costs to confirm. However, the key point is that the two are separate and one is not meant
to support the other. Fortunately for the City, both sectors have been quite successful at
creating affordable housing over their respective tenures.
As to the suggested relationship between fee-in-lieu amounts and credit values, based on our
interviews with various stakeholders and our evaluation of the City’s program, we are unable
to draw a sufficiently singular connection between the amount of the fee-in-lieu and the value
of a credit to support a recommendation that the former should be calculated in light of the
later.
First, affordable housing credit sales do not involve the City of Aspen. Rather, the seller of
credit sets the desired price, the buyer pays the value they believe to be market rate, and the
47
40
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
City is not involved. Does the amount of the fee-in-lieu affect the credit buyers’ willingness
to purchase or pay a given amount for a credit? It may, but there are many factors which
presumably also influence that decision.
Furthermore, as noted, the nature of the credit market is so constrained and unique, that it
is not possible to tie the City’s fee-in-lieu to the value of a given credit on the free market to
closely. It may have a stronger bearing for one purchaser, but very little for another.
It is more likely that the overriding and across-the-board factors defining the value of credits
include:
1. Other costs the market-rate developer bears in the FTE-generating
development;
2. The scarcity and highly varied nature of Aspen’s land market;
3. The very limited opportunity of the developer to pay fee-in-lieu as an alternative
to other options, due to the City’s low prioritization of the fee-in-lieu option);
4. Development alternatives available to market-rate developers, both within
Aspen, but also in Pitkin County and other areas within commuting distance;
5. The costs and appeal of mitigation options other than fee-in-lieu and credits,
including built housing, buy-downs, or purchase and deed-restriction;
6. The limited number of credit holders in the market;
7. The limited number of potential credit purchasers in the market; and
8. The limited availability of credits available on the free market, since credit
holders are not obligated to make credits available at all or at a given price (i.e.,
a credit holder may retain the credit for investment or their own use.
Recall, the option to use the fee-in-lieu alternative is quite limited. Payment of the fee-in-
lieu is the lowest prioritized mitigation option and its use, in most cases, would have to be
approved by City Council action. So, while the fee-in-lieu option may influence the decision
to purchase credits on the free market for some, the amount of the fee-in-lieu set by the City
is likely to have only a minor impact on how the market establishes the value of a credit.
There is, however, the belief among some in the community that the fee-in-lieu is directly
related to the price of a free market credit. In practice, however, it is not clear whether this is
the case. The current credit market “economy,” so to speak, simply doesn’t allow for the type
of competition and fungibility to conclude the two are related. We cannot conclude therefore,
that an increase in the fee-in-lieu would increase the value of an affordable housing credit.
And, this gets us to the second part of Methodology Issue #4: does the amount of the City’s
fee-in-lieu reflect the actual cost of the private sector to provide housing. In short, perhaps it
does to a certain degree, but, most important, it is not intended to.
48
41
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
c. metHodology iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
As is discussed above and in Methodology Issue #2, the fee-in-lieu reflects the City’s cost to
build affordable housing, not those of the private sector. Rather, the City’s cost, as described
elsewhere, may reflect below market costs (e.g., land that has been purchased and held) and
thus not entirely reflective of a private sector development pro forma.
This is fitting, of course, since the current program applies fee-in-lieu revenues to City housing
projects, not that of private developers. Indeed, as has been discussed, this is the way the
credit program was set up in 2010. The program is a separate ordinance and economic
component of the City’s overall housing mitigation effort. By any account, the two have
worked reasonably well together, given the magnitude and complexities of the City’s housing
challenges. Though they work towards a common goal, neither is intended to “sustain” the
other. To reform one or the other for the purpose of doing so, would distort and may threaten
their current effectiveness.
Finally, recall that total mitigation requirements for development are a combination of fee-
in-lieu, as well as generation and mitigation rates. For example, the fee-in-lieu for non-
residential development today is priced at only 65% of the assumed full cost impact. Since
credits are a function of the private market, a City-imposed mitigation rate would not be
appropriate. In fact, the City has expressly removed itself from influencing the value of
credits.
b) Recommendation
It is unclear whether the City’s fee-in-lieu amounts affect the value of Affordable Housing
Credits available in the market. Rather, it appears from our analysis that the City’s prioritization
of “construction first” - rather than “fee first” – and other factors and constraints on the credit
market have the predominant impact on the value of AHCs and the credit system itself. Even
if fee-in-lieu amounts do impact the value of a credit, it seems the system was set up for the
“competition,” so to speak. That is, if the City’s costs to build affordable housing are less,
then one may well expect the fee-in-lieu to be less than the market value of a credit. On the
other hand, all things being equal, it might be easier to purchase a credit than to pay fee-in-
lieu, given the limited availability of the fee-in-lieu option under the City’s current framework.
This would drive demand towards credit, presumably creating upward pressure on their value.
Therefore, unless the City’s wishes to pursue a significantly different approach to the provision
of affordable housing in the future—specifically with respect to the current roles of the public
and private sectors—we recommend the City apply the cost-driven methodology to its next
full update, without regard to the impact of the fee-in-lieu on the value of outstanding or
future affordable housing credits. While there may be a relationship between the two, we
cannot reasonably predict the effect of the change in one on the other, sufficient to support a
recommendation.
49
42
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
d. AdditionAl metHodologicAl conSiderAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
D. ADDITIONAL METHODOLOGICAL CONSIDERATIONS
In addition to the about four areas of our scope of work, we noted in our efforts that it
would be advisable for the City to look again at three component variables of its mitigation
program: employee generation rates, mitigation rates, and employees per residential unit. It
is important that these be revisited – and perhaps updated – at regular intervals. Each of the
three is discussed briefly here.
1. Employee Generation Rates and Mitigation Rates
a) Employee Generation Rates
The Land Use Code, sets out the employee generate rates calculated by a study in 2012,
which surveyed over 100 local businesses to establish applicable generation rates. Employee
generation rates are stated as FTEs per one thousand (1,000) square feet of new net leasable
space or lodge bedrooms creating the demand for new housing.
Since new development must mitigate a portion of the
new employees it generates, it is important to ensure that
the assumed rates remain accurate and up-to-date. The
lower the rate of employee generation, the less mitigation
is required and, of course, the higher the rate, the greater
mitigation is required.
Note, however, that the amount ultimately required of new
development depends upon how much of this impact new
development is required to bear. This is known as the
“mitigation rate,” which is discussed next.
b) Residential and Non-Residential Mitigation Rates
As discussed previously, the City’s existing fee-in-lieu rates reflect only a percentage of the
total calculated impact of new development on the need for additional affordable housing.
Generally speaking, new residential development must include 60-70% affordable units and
nonresidential development mitigates only 65% of its calculated impacts.25 Therefore, it is
important to understand the relationship between the employee generate rate, the adopted
mitigation rate, and the final mitigation or fee-in-lieu to be provided by the applicant. During
the updated nexus study, the City will need to confirm its policy with respect to its adopted
mitigation rates and its policy objectives in the future.
Both the employee generation and mitigation rates are set forth in the City of Aspen Land Use
Code and summarized here in Figure 9.
25 City of Aspen Land Use Code § 26.470.090. Rates vary by land use type and the nature and extent of the
proposed development.
Higher employee generation
rates would reflect a greater
demand for new affordable
housing and, therefore
would pressure fee-in-lieu
amounts upward.
Conversely, lower employee
generation rates, direct fee-
in-lieu lower.
50
43
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
d. AdditionAl metHodologicAl conSiderAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 9. Employee Generation Factors and Mitigation Requirements
Residential Development
Type Unit of Development Mitigation
Requirement Source/Citation
First 4,500 square feet of
floor area 0.16 employees (FTEs) per
1,000 sq. ft. of floor area
City of Aspen Land Use Code,
§26.470.090(A)(3)(c); and
Above 4500 square feet of
floor area 0.36 employees (FTEs) per
1,000 sq. ft. of floor area
APCHA Employee Housing
Guidelines, June 2019, Table V.
Multifamily Square feet of expansion 0.18 employees (FTEs) per
1,000 sq. ft. of floor area 30% mitigation City of Aspen Land Use Code,
§26.470.090(B)(2)(c)
30% mitigationSingle Family, Duplex
Employee Generation Rates
c)
Nonresidential Development
Zone District Unit of Development Mitigation
Requirement Source/Citation
Commercial Districts [1]Square feet of expansion 4.7 employees (FTEs) per
1,000 sq. ft. of floor area 65% mitigation City of Aspen Land Use Code,
§26.470.050(B)(Table 3)
Mixed-Use (MU) [2]Square feet of expansion 3.6 employees (FTEs) per
1,000 sq. ft. of floor area 65% mitigation City of Aspen Land Use Code,
§26.470.050(B)(Table 3)
Service Commerical Industrial
(S/C/I)Square feet of expansion 3.9 employees (FTEs) per
1,000 sq. ft. of floor area 65% mitigation City of Aspen Land Use Code,
§26.470.050(B)(Table 3)
Public [3]Square feet of expansion 5.1 employees (FTEs) per
1,000 sq. ft. of floor area 65% mitigation City of Aspen Land Use Code,
§26.470.050(B)(Table 3)
Lodge Preservation (LP) lodge
units Bedrooms 0.3 employees (FTEs) per
lodging bedroom 65% mitigation City of Aspen Land Use Code,
§26.470.050(B)(Table 3)
Lodge (L), Commercial Lodge
(CL), Ski Base (SKI), and other
zone district lodge units
Bedrooms 0.6 employees (FTEs) per
lodging bedroom 65% mitigation City of Aspen Land Use Code,
§26.470.050(B)(Table 3)
[1] Commercial Core (CC), Commercial (C-1), Neighborhood Commercial (NC), Commercial Lodge (CL) commercial space, Lodge (L) commercial space,
Lodge Preservation (LP) commercial space, Lodge Overlay (LO) commercial space, Ski Base (SKI) commercial space.
[2] Separate uses in a mixed-use building are evaluated separately.
[3] Employee factors reflect office-type public uses; public facility proposals are evaluated on a case by case basis.
Employee Generation Rates
Occupancy Standard (employees per unit)
The third area for additional consideration are the City’s assumed occupancy standards,
which are set forth in section 26.470.050(D) (Table 4) of the Land Use Code. They are
summarized in Figure 10 below.
The occupancy standard reflects the number of employees assumed to be housed in
each type and size of a housing unit. This factor is based on a factor of 400 square feet
per employee. (e.g., a studio unit of 500 square feet is calculated to accommodate 1.25
employees (500 sq. ft. / 400 sq. ft. = 1.25)).
51
44
DRAFT - FOR DISCUSSION ONLY
III. mEthodology ISSuES and rEcommEndatIonS
d. AdditionAl metHodologicAl conSiderAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 10. City of Aspen Affordable Housing Minimum Square Feet and Occupancy Standards
Unit Type/Size Min Sq. Ft.
Occupancy Standard*
(Number of Employees
Housed/Mitigated)
Studio 500 1.25
1 Bedroom 700 1.75
2 Bedroom 900 2.25
3 Bedroom 1200 3.00
4 or more bedrooms 0.5 per bedroom
* Based on 400 square feet per employee.
Source: City of Aspen Land Use Code, §26.470.050(D)(Table 4) and §26.470.050(F);
APCHA Employee Housing Guidelines, June 2019, Tables VI and VII.
During its study update, the City should verify whether these estimates continue to reflect the
current market and occupancy rates.
52
POLICY ISSUES AND
RECOMMENDATIONS
53
46
IV. POLICY ISSUES AND
RECOMMENDATIONS
A. POLICY OVERVIEW
In addition to the four methodological questions reviewed above, this report answers three
specific questions of policy or law.
POLICY ISSUE #1:
What are the policy ramifications and legal issues surrounding the fee-in-lieu
option as a component of the City’s current housing mitigation program?
POLICY ISSUE #2:
What are the policy ramifications and legal issues with regard to the thresholds
and conditions under which an applicant may pay fee-in-lieu as a compliance
options?
POLICY ISSUE #3:
What are the implications of the City’s fee-in-lieu thresholds on the City’s housing
credit program?
This section of the report, evaluates and offers a response to each of these issues. However,
since to do so requires a general understanding of the statutory and case law surrounding
fee-in-lieu and housing mitigation in general, the following sections provides some context.
B. LEGAL BACKGROUND & REVIEW
1. Generally
Aspen is a home rule city and has all powers possessed by the legislature as to matters of
local concern.26 Since zoning is a matter of local concern and housing mitigation regulations
are a matter of zoning, it follows that housing mitigation regulations would also be authorized
under the City’s home rule powers,27 except to the extent that it is preempted by state
statutes that regulate a matter of statewide concern.28 As part of this study, we have reviewed
the City’s current fee-in-lieu program, against an admittedly uncertain legal backdrop of cases
and statutes, and nonetheless believe it to be largely sound. However, this area of planning is
in a state of flux nationally and in Colorado.
26 Colo. Constitution Art. XX, § 6.
27 City of Greeley v. Ells, 186 Colo. 352, 527 P.2d 538 (1974).
28 D. Elliott, Colorado Planning and Development Law (7th Ed. 2006), at 4-8; Lot Thirty-Four Venture, L.L.C.
v. Town of Telluride, 3 P.3d 30 (Colo. 2000) (housing mitigation ordinance establishing maximum rents
preempted by state rent control statute, which addresses matters of mixed statewide and local concern).
54
47
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
B. legAl BAckground & revieW
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
On the national scene, fortunately, with some recent cases out of California, the outlook is
less murky. The weight of the cases seems to categorize inclusionary housing programs
as usual land development regulations inherent in the police power and not a question
implicating regulatory takings in most instances. However, the Colorado courts have not
weighed in directly on the issue and actually have created some additional uncertainties under
state law, which we will get to. We have, therefore, made a series of recommendations, which
balance the City’s urgent interests in seeing more affordable housing in the community with
the known and probable legal limitations on how local governments in Colorado can go about
accomplishing that.
2. The Legal Framework for Local Governments
Unfortunately, when it comes to housing mitigation, including fee-in-lieu, the Colorado courts
have not expressly resolved the source of authority under which cities and counties in the
state may operate. Therefore, a brief overview of the distinctions among types of mitigation is
provided first, followed by an evaluation of the three policy questions posed.
a) Nomenclature
Affordable Housing programs that require new development to mitigate impacts on local
affordable housing availability, tend to fall into one of several categories, including:
1. Inclusionary Housing – where developers are required to provide a percentage
of total homes built as affordable housing.
2. Housing Impact or Linkage Fees – where a “fee” is calculated based on
the additional housing capacity demanded by new development, due to the
generation of new employees in the community. These fees are included in
a legislatively-adopted schedule, which are generally-applicable to each new
development.
3. Land Use Regulation – where new residential and non-residential development
is required to mitigate its impacts on affordable housing as a development
standard precedent to use establishing a new use of property.
4. Development Agreements – where developers and approving governmental
agencies negotiate on a case-by-case basis the extent, amount, and nature of
housing to be provided by the proposed new development.
Aspen’s growth management quota system (GMQS) and its prior iterations, along with the
AHC program, have included a number of aspects of these techniques. The GMQS requires
a percentage of each new development’s housing impact to be mitigated (the “mitigation
rate”) in order to put a property to a new use, and allow mitigation in many forms, including
by monetary contribution. However, the GMQS is likely best categorized as a land use
regulation, subject to mitigation alternatives, including the option to make a monetary
contribution in the form of a “fee-in-lieu.”
55
48
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
B. legAl BAckground & revieW
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
From a planning point of view, the distinction between these purportedly distinct categories
may be less meaningful. In each case, the public policy objective is simply that affordable
housing keeps up with new demand created by new development, typically by way of several
alternative means of doing so. For example, contributions of constructed housing can
typically be made to meet fee-based requirements and, conversely, monetary contributions
can usually be made to meet construction-based requirements. Though it might be that each
approach falls into either a “fee-first” or “construction-first” category. Aspen’s would be a
“construction-first” approach (which fees as an option). Pitkin County’s, on the other hand, is
a “fee-first” approach, as a housing impact fee.
b) Constitutional Considerations
From the legal point of view, the courts have regarded this range of tools as either exactions
or land development regulations and each has a different legal standard with which to comply.
Unfortunately, the courts have not been consistent in their categorizations, nomenclature, or
legal standards from case-to-case or state-to-state.
Ad hoc exactions, which typically would only be made as a condition of a development
approval, as distinguished from the above-listed approaches, must comply with essential
nexus and rough proportionality requirements, which were adopted by the U.S. Supreme
Court in the 1980s and 90s.29 These standards apply whether the ad hoc exaction is in the
form of land, construction, or money.30
However, legislatively-adopted, generally-applicable mitigation regulations – impact fees,
for example – are not generally held by the courts to the heightened standards of essential
nexus and rough proportionality. The Colorado Supreme Court said as much in Krupp v.
Breckenridge Sanitation District31, when it held that legislatively-adopted impact fees are not
subject to the taking standards of Nollan and Dolan. Given the nature of the City’s GMQS and
fee-in-lieu component, it seems less likely a court would apply the Nollan/Dolan standard in
the event of a challenge, however, that cannot be certain unless or until the courts address a
housing mitigation system more similar to Aspen’s.32
Other cases around the country have held that legislatively-adopted, generally-applicable
inclusionary housing programs, per se, are not exactions, but rather are land development
regulations authorized under the police power.33 Programs have been upheld , for example,
29 See Nollan v. California Coastal Commission, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374
(1994).
30 Koontz v. St. Johns River Water Management District, 133 S. Ct. 2586 (2013).
31 19 P.3d 687 (Colo. 2001).
32 Note that, in 2009, a Gunnison County district judge granted Gunnison County’s motion for summary
judgment on a challenge against its housing fee, which was being charged against new residential
construction. However, this is an unreported case and its applicability to other programs has not been
established.
33 See e.g., CBIA v. San Jose, 351 P.3d 974 (Cal. 2015) (upholding inclusionary housing ordinance as a
reasonable regulation, not an exaction), CBIA v. San Jose, 136 S. Ct. 928 (2016), cert. denied.
56
49
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
B. legAl BAckground & revieW
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
where the community demonstrates the severity of its affordable housing challenge and the
extent to which this challenge impacts land use and socio-economic policies objectives in
the community. In December 2019, the U.S. Supreme Court declined to review the Cherk v.
Marin County case from California, in which the California Court of Appeals refused to apply
the heightened standards of Nollan and Dolan to a legislatively adopted housing fee-in-lieu
requirement.34
Even still, the City has always strived to ensure that no housing mitigation is required except
when there is an established nexus and proportionality between developments providing
mitigation and the resulting housing.35 It has done so through studies, including one in 2012
performed by the outside firms of RRC and Rees and the in-house calculations performed
more recently, in 2015.
c) State Law Considerations
Two additional areas of state law should also be considered.
(1) Statutory Property Rights Protections
First, the Regulatory Impairment of Private Property Rights Act of 2001 (RIPRA) creates
a cause of action for property owners subject to exactions made by local government
as a condition of approval, where the local government fails to establish nexus and
proportionality.36 Again, since the City’s GMQS mitigation regulations have been legislatively-
adopted, it is less likely that it would be subject to a RIPRA cause of action. Furthermore, as
noted, the City has based its mitigation regulations, whether legislatively adopted or not, on a
demonstration of nexus and proportionality.
(2) Rent Control Considerations
Second, in 2000, the Colorado supreme court held that the Town of Telluride’s inclusionary
housing requirements amounted to a form of rent control, which was a power precluded by
state statute.37 In 2010, the Colorado General Assembly revised the rent control statute to
exclude certain voluntary actions. In sum, the revised statute does not apply to controls on
residential rents that are subject to either (a) a voluntary agreement limiting rent or providing
affordable housing; or (b) a deed restriction placed on the unit pursuant to a voluntary
agreement. In addition, approval of a development permit cannot be withheld for an
applicant’s refusal to enter into a voluntary agreement with a local government.38
Though there has been little in the way of litigation post-Telluride, the City of Aspen
defended a lawsuit about ten years ago against the claim that a deed-restricted unit had
34 See Cherk v. County of Marin (Dec. 14, 2018), A153579.
35 Note as well that residential and nonresidential mitigation is limited to only a percentage of total impact.
36 C.R.S. §§ 29-20-201 through 205.
37 Telluride v. Lot Thirty-Four Venture, L.L.C., 3 P.3d 30 (Colo. 2000).
38 C.R.S. 38-12-301.
57
50
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
B. legAl BAckground & revieW
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
been created involuntarily and, therefore, in violation of the rent control statute. The City
ultimately prevailed since the record failed to indicate any duress, threat, or lack of reasonable
alternatives available to the applicant at the time.39
Accordingly, communities in Colorado that have adopted or continued inclusionary housing
programs, have taken steps to ensure any limitations on rent are voluntarily made, including:
1. Limiting mitigation regulations to for-sale units;
2. Providing alternative means of complying with a mitigation regulation (including
fee- or cash-in-lieu);
3. Providing a subsidy to developers who include affordable housing in their
developments, through a housing partnership with the developer;
4. Providing a bonus to developers who voluntarily provide affordable housing;
5. Encouraging developers to propose affordable housing mitigation through
discretionary approvals and voluntary agreements; and,
6. Allowing payment of fee-in-lieu as an alternative to requiring housing with
mandated rent limits.
Generally speaking, the City’s program involves housing built by developers of FTE-generating
projects, which may, among other things, be deed-restricted at the affordability rates set
forth in the Aspen Pitkin County Housing Authority Guidelines. However, most mitigation is
made through either fee-in-lieu contributions, credit purchase and extinguishment, or through
other voluntary mechanisms. Meaning that developers have a number of options that do not
require them to provide rental housing at “controlled” levels.
Currently, the Colorado Municipal League is working with several state legislators to prepare a
bill that would expressly authorize inclusionary housing and similar tools, outside the scope of
rent control, however, as of the date of this report, no bill has been filed.
Housing advocates and communities facing affordable housing crises believe such legislation
might clarify local government authority in this area.
Rather, in the case of fee-in-lieu and credits, they are paying others who have chosen,
voluntarily, to build deed-restricted housing, either the City or a private developer.
Furthermore, deed restricted for-sale units, which are not subject to rent control prohibitions,
qualify for mitigation. In addition, the City accepts accessory dwelling units as mitigation
without rent limitations. There are options in some cases for providing resident occupied
(RO) units and, indeed, participation in the fee-in-lieu or credit system may amount to a public
partnership under C.R.S. 38-12-301.
39 Meyerstein v. City of Aspen, 282 P.3d 456 (Colo. App. 2011).
58
51
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
c. policy iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
C. POLICY ISSUES
In order to evaluate the methodological issues set forth in Section III and our
recommendations in Section V, here we address three specific areas of policy related to the
City’s fee-in-lieu program and the legal context of each.
1. What are the policy ramifications and legal issues surrounding the fee-in-
lieu option as a component of the City’s current housing mitigation pro-
gram?
a) Discussion
As we have discussed, the City prefers housing mitigation in the form of on- or off-site
constructed housing, because it typically results in affordable housing units more quickly than
a monetary contribution might. As a practical matter, however, this presents a number of
logistical challenges to some development creating the need for new housing.
First, some applicants – particularly those seeking a minor expansion to an existing use – may
not be positioned to construct affordable housing or to contract for someone else to do so.
Indeed, some of the criteria for City Council approval of fee-in-lieu requests recognize that
doing so will be impractical in some cases.40 The fee-in-lieu addresses that contingency well.
Second, some impact-generating developments are small enough to generate less new
housing demand than a full affordable housing unit would require. These are commonly
referred to as “fractional” units or FTE’s and a fee-in-lieu (or credit) option gives these smaller
developments a readily available means of complying with City mitigation regulations.
As discussed above, until we receive further guidance from the courts or the general
assembly, it is not certain whether the courts will characterize all or some components
of housing mitigation as a development regulation or an exaction. Nonetheless, the City
historically has taken steps to ensure all alternatives for mitigation compliance meet nexus
and proportionality. The U.S. Supreme Court and other courts have held that the availability
of at least one compliance alternative meeting constitutional standards can defeat a taking
claims.41 Accordingly, the flexibility that the fee-in-lieu and, to a lesser degree, the AHC
program offer provides a reasonable alternative for “fractional” projects to comply.
Third, until the issue of rent control is resolved in Colorado, having the option to pay into
a fund instead of being required to construct housing, may support a legal defense along
these lines. And, the availability of private-market credits, and fractions thereof, gives Aspen
developers another way of mitigating housing impacts without a mandate to construct deed-
restricted rental housing as a condition of approval.
40 City of Aspen Land Use Code § 26.470.010 (C).
41 See e.g., Koontz, 133 S. Ct. at 2598 (2013) (recognizing the availability of at least one constitutional
alternative as grounds for meeting constitutionality, but rejecting application in the case).
59
52
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
c. policy iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
b) Recommendation
While some Colorado jurisdictions have, in fact, precluded use of a fee-in-lieu option –
perhaps for good policy reasons – we nevertheless recommend the City retain the fee-in-lieu
option, while monitoring any legislative or judicial action taken regarding housing mitigation
legal authority. The fee-in-lieu offers more options to developers for complying and decreases
the chances of a legal challenge being successfully brought against the City.
2. What are the policy ramifications and legal issues with regard to the thresh-
olds and conditions under which an applicant may pay fee-in-lieu as a com-
pliance options?
a) Discussion
Currently, developers may satisfy mitigation regulations by fees-in-lieu either:
1. By right, for developments generating less than .1 of an FTE in housing demand;
or
2. By approval of City Council, based on listed criteria in the GMQS chapter.
As noted above, Aspen – like many communities with critical affordable housing shortages –
has encouraged mitigation through constructed housing, instead of monetary contributions,
in order to stimulate housing availability closer in time to the impact being created by new
development. This has been accomplished by limiting the availability of the fee-in-lieu
alternative to new developments generating less than .1 FTE of housing demand or those
which demonstrate impracticability, good-faith efforts to procure built housing (including
through credits), and advancement of near-term housing goals.
What are the ramifications on the City’s housing program, of further encouraging fee-in-lieu
alternatives or, conversely, of encouraging increased use of fee-in-lieu? In other words,
should the City expand use of or limit use of fee-in-lieu?
First, we recommend maintaining an option to mitigate through fee-in-lieu based upon a
showing of impracticability, either due to site constraints, the market, or other factors. This
protects both private property interests (in moving forward more quickly) and the City’s
housing objectives (in maintaining its role in the production of affordable housing).
Second, as discussed in the preceding section, there are legal and practical reasons
to include the fee-in-lieu option and we believe its availability support’s the City’s legal
position. That question will be answered based on market and site conditions. Therefore, we
recommend the current by-right threshold of .1 FTE not be lowered at this time.
But, what then would the likely impact of raising the fee-in-lieu threshold on the production
of affordable housing? Recall, fee-in-lieu revenues are used solely by the City for the
construction of housing. They are not passed along to private developers of affordable
housing. These developers receive contributions, or participation, through a private credit
60
53
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
c. policy iSSueS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
market created by the City. Therefore, if the threshold were increased and more fees-in-lieu
were used for mitigation, more resources might accrue to the City for its building program,
while possibly lowering the demand for private sector credits. In addition, encouraging
greater use of fee-in-lieu may augment the defensibility of the program, unless the general
assembly passes legislation regarding the Telluride decision.
Therefore, the question the City must address is whether a change in the fee-in-lieu qualifying
threshold would create a meaningful change in the amount of affordable housing produced?
The answer will depend on the extent to which – given Aspen’s geography and tight housing
market – the City and private developers each has the ability to continue to generate housing
in the long-term?
1. Is the public sector uniquely positioned to avail itself of land opportunities and
resources that the private sector is not?
2. Will the City’s lack of control over the availability and pricing of credits result in a
lack of mitigation opportunities to developers who cannot secure a credit in the
private market?
3. Are other constraints on the credit system (e.g., there being no requirement that
credit-holders make their credits available on the market) such that increased
use of fee-in-lieu would not create a noticeable impact on the credit market?
4. Are City staffing and other resources sufficient to take on more of the
responsibility for affordable housing production long-term?
b) Recommendation
On balance, consistent with our discussion in the preceding section, we recommend the
City maintain or encourage increased use of fee-in-lieu, but that it does not reduce the
threshold for using fee-in-lieu at this time. In fact, the City may consider an approach similar
to Pitkin County’s which – though called an “impact fee” by some – would require a monetary
contribution as the default means of mitigation, rather than actual construction at the time of
development. This would give more control to the City over the mitigation it receives, which
could continue to include subsidies to private sector builders of affordable housing.
61
54
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
d. AdditionAl policy conSiderAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
3. What are the implications of the City’s fee-in-lieu thresholds on the City’s
housing credit program?
a) Discussion
As discussed in the Methodology section, Section III, the City’s fee-in-lieu and AHC programs
are separate and distinct from one another. The fee-in-lieu concept was part of the City
GMQS prior to the introduction of the credit program in 2010. In addition, the revenue
streams generated by payment of fee-in-lieu and by purchase of credits flow to separate
entities and are used in distinctly different ways, though both have been effective at producing
affordable housing. Therefore, we were not able to conclude that the amount of the City’s
fee-in-lieu has a significant or overriding effect on the private sector value of a credit.42
b) Recommendation
While it may be that an increase in the use of fee-in-lieu (whether through a regulatory
loosening or a reduction in their amounts) may reduce use of the credit program, it is
uncertain the extent to which one would affect the other. The credit market and “credit
economy,” so to speak, are simply too small and there are too many factors at play within
them to support a recommendation to revise one or the other to achieve an expected
outcome of ultimately affecting the credit market or the long-term affordable housing stock.
The relationship between the amount and availability of fee-in-lieu is simply to complex.
D. ADDITIONAL POLICY CONSIDERATIONS
1. Income Categories of Affordability
Currently, the City has adopted seven categories of relative affordability, based on the level
of income associated with the employees generated by new development.43 However,
consistent with APCHA guidelines, only Category 1-4 units may be provided as required
mitigation; although voluntary units may be provided for higher income categories.
Currently, individual developers are working on a case-by-case basis with APCHA to
determine the most applicable income category for a given development. During the nexus
study update, the City should affirm its approach in this area and evaluate whether a different
approach should be considered.
42 Of course, assuming the demand for housing remains constant, and if credits were readily available on the
free market, at any time, to any interested buyer, it might be that an increase in fee-in-lieu amounts might
increase the value of a credit.
43 City of Aspen Land Use Code § 26.470.050(E).
62
55
DRAFT - FOR DISCUSSION ONLY
Iv. PolIcy ISSuES and rEcommEndatIonS
d. AdditionAl policy conSiderAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
For example, the City of Carbondale requires a mix of categories for each development
project, by “cycling” through income categories 1-4. For example, a development with 6
affordable units is required to provide one each in categories 1-4 for the first four units, then
an additional one categories 1 and 2 for the fifth and sixth units. Any change in policy, of
course, should follow discussion with and input from APCHA.
2. Exemptions and Applicability
Currently, there are a number of land uses that are not subject to the City’s housing
mitigation.44 Some do not create the need for new housing, like residential remodels. Others
reflect methodological and policy objectives, like common areas in multi-family not being
counted as employee-generating or upper and basement floor nonresidential being subject to
a 25% reduction in employee generation rate.
Exemptions also should be revisited during the nexus study update to confirm their current
applicability and to measure their impact on the production of affordable housing and on the
reasonableness or proportionality of mitigation regulations.
3. Mitigation Review Processes & Credit Issuance
Section 26.470.080 lays out the approval processes for development subject to the GMQS,
including paragraph (D), which addresses the housing mitigation component. Section
26.540.080 of the credit program provides for the issuance of affordable housing credits at
the time certificates of occupancy are issued for mitigation housing.
During the update process, the City should revisit these processes as well. It is important that
each approval process reflect a level of review that balances the public’s interest in housing
mitigation and private sector’s need for predictability and efficiency. Are there any barriers
that can be removed or revamped to encourage more participation in programs the City
wishes to advance?
One thing, for example, we have heard from stakeholders is that private sector providers of
affordable housing would benefit from the City issuing credits – or some credits – sooner
than certificate of occupancy for deed restricted units; perhaps upon completed framing or
plumbing inspections. This might create a commodity for the developer to recoup some
costs sooner in the process. Of course, while this may well be a reasonable change, it must
be balanced against the public’s interest in knowing that the affordable housing will, in fact,
be completed. Staff and the development community have discussed whether a reasonable
and simple performance bonding requirement might address this need.
44 City of Aspen Land Use Code § 26.470.070.
63
REPORT RECOMMENDATIONS
& NEXT STEPS
64
57
V. REPORT RECOMMENDATIONS &
NEXT STEPS
A. IN GENERAL
The community’s interest in providing affordable housing continues to be urgent, both in
terms of quality of life and the ongoing success of the local economy. Perhaps most critical,
however, is the fact that current construction costs per square foot are approximately forty
percent (40%) higher than estimated costs in 2015, the last time the fee-in-lieu was updated.
This amounts to roughly an eight percent (8%) average annual increase.
Therefore, we recommend the City pursue its nexus study in Task 4, to confirm ongoing legal
compliance and to assess the extent revisions may increase affordable housing production.
In doing so, we further recommend the City revisit several specific variables that are
components of its fee-in-lieu program and process.
The overarching objectives of a fee-in-lieu study update are to ensure:
1. costs component is up-to-date and reflects the Aspen market and environment;
2. the updated fee-in-lieu is fair and sufficient to meet the full cost of the demand
for affordable housing created by new development; and
3. the updated fee-in-lieu calculation is transparent and easily updated.
Legally speaking, the update will:
1. Maintain and verify the proportionality of the City’s mitigation regulations over
time;
2. Sufficiently document the nature and extent of the City’s affordable housing
challenge, demonstrating the reasonable and rational basis for its land use
regulations;
3. Seek community and developer support in maintaining an approach that is both
effective and defensible;
4. Monitor relevant legislative and, if applicable, judicial changes to guide the
update; and
5. Simplify the GMQS and AHC program where possible and revise to remain
consistent with and not redundant of APCHA Guidelines.
65
58
DRAFT - FOR DISCUSSION ONLY
v. rEPort rEcommEndatIonS & nExt StEPS
A. in generAl
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
A full update to the fee-in-lieu study is standard procedure for fee studies. Impact fee and
other mitigation or linkage fee studies typically are updated every three to five years to
account for changes in economic and other conditions in a community. We recommend that
the following specific elements be addressed as part of the City of Aspen’s fee-in-lieu update:
»Total development costs (land acquisition, construction costs (soft,
hard, etc.));
»Assumptions regarding the City’s share of total development costs;
and
»Assumptions regarding revenue streams per unit category (which
may also require assumptions regarding whether units are rental or
for sale at different category levels)
If the City desires to update only the cost and revenues on which the fee-in-lieu is based, then
the above components will suffice. However, a more comprehensive evaluation would also
include: employee generation rates; mitigation requirement rates; and occupancy standards
(i.e., square footage of housing per FTE to be provided
to mitigate the impact). Changes to any of the above
assumptions will affect the fee calculation.
Such an update is important to ensure core component
variables are current and reflect recent market trends,
which may or may not ultimately impact the amount of
the fee-in-lieu finally adopted. Nonetheless, the update
should evaluate each component either to verify its ongoing
accuracy in today’s market or to be updated.
The following summarizes the recommendations of this
report and outlines the recommended next steps for the
update study.
During its next update,
the City also should revisit
employee generation
rates, mitigation rates,
and occupancy standards
(FTEs / affordable
housing dwelling unit),
in addition to costs and
revenues estimates.
66
59
DRAFT - FOR DISCUSSION ONLY
v. rEPort rEcommEndatIonS & nExt StEPS
B. metHodology recommendAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
B. METHODOLOGY RECOMMENDATIONS
1. Use a “cost-driven” approach to update the fee-in-lieu calculations, in order to
capture full net costs of construction. The update should include updated cost
figures based on recent and representative City affordable housing projects,
the City’s share of costs to development, and applicable revenue assumptions
based on income levels targeted for affordable units. If permissible, determine
whether it is appropriate to consider the City’s costs for staff time, overhead,
and other related “soft” costs.” Assuming fee-in-lieu revenues continue to be
used solely for City projects, actual costs should be reduced by anticipated
revenues from sales, rentals, and other sources that will accrue to the City.
The recommended formula is depicted graphically in the Executive Summary
as well as in Section III. Note that changes to FTEs/demand unit, the mitigation
rate, and costs (show in orange in the depiction) would impact the fee-in-lieu
amounts per FTE generated (see Methodology Recommendation #6, below).
These variables will be revisited and confirmed during the Task 4 full fee study
update.
2. Calculate land and construction costs separately during the update and annual
adjustments. Despite the challenge of incorporating land costs into a static
formula, assumptions can be made, based on the anticipated end use of fee
revenues. Use of the fees, as to land, will vary according to the location of lands
anticipated for the City’s development of affordable housing.
3. Calculate costs and revenues “per square foot” to set the fee-in-lieu and to
simplify the initial calculation, as well as annual adjustments. The cost per
square foot can then be shown by land use type or “per FTE,” as needed.45 For
consistency, the same square footage factor should be used between bedrooms
and FTEs mitigated, for both the fee-in-lieu and AHC program.
4. The City should base its annual fee-in-lieu adjustments on the Engineering News
Record (ENR) Construction Cost Index (CCI). This approach will reasonably
capture Aspen’s market trends and realities, particularly if:
a. the National ENR CCI is used, not the city-specific CCI, which is
susceptible to localized price fluctuations due to labor markets,
weather, and other trends, which may not reflect the unique location
and environment of Aspen; and
b. the City makes the annual adjustment consistently each year.
As noted in 2. above, land costs should be addressed separately during annual
adjustments, in order to better reflect Aspen-specific changes in construction
costs.
45 The current Land Use Code establishes a conversion factor of 400 square feet of net livable area per FTE.
See § 26.470.050. Therefore, a simple calculation emerges, using the rounded down gross cost per square
foot from recent City affordable housing projections, based on land and construction.
67
60
DRAFT - FOR DISCUSSION ONLY
v. rEPort rEcommEndatIonS & nExt StEPS
c. policy recommendAtionS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
5. While the amount of the fee-in-lieu may impact the value of private market
credits in some instances, the connection between the two could not be
established strongly enough to amount to a recommendation regarding the fee-
in-lieu update.
6. Revisit the following component variables of the housing mitigation program, for
verification or update:
a. employee generation rates;
b. residential and nonresidential mitigation rates; and
c. employees per residential dwelling unit (i.e., square feet of dwelling
unit per employee).
C. POLICY RECOMMENDATIONS
1. Retain the fee-in-lieu option. Monitor legislative or judicial changes during the
City’s nexus study update.
2. Maintain or increase, but do not decrease, availability of the fee-in-lieu option as
an alternative means of complying with the GMQS.
3. Future policies and methodologies should be based on legal defensibility,
fairness, and effective production of affordable housing, and not the amount of
the fee-in-lieu relative to the value of affordable housing credits.
4. Consider whether revisions to components of the housing mitigation program
would increase the availability of constructed affordable housing for Aspen
employees, including:
a. whether additional income categories of affordability should be
considered as qualifying mitigation;
b. whether existing exemptions and applicability criteria continue to
meet City objectives;
c. whether current processes for mitigation approval, qualifying
thresholds, and credit issuance and timing, can be revamped to
encourage greater participation or efficiency of process.
68
61
DRAFT - FOR DISCUSSION ONLY
v. rEPort rEcommEndatIonS & nExt StEPS
d. tHe Big picture
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
D. THE BIG PICTURE
As the ten key recommendations above show, one must take into account many overarching
considerations when updating or revising programs as structurally and legally complex as
housing mitigation. For example, we have recommended the cost component of the updated
fee-in-lieu be based on actual project costs the City will incur to provide housing. This is
premised on the continued use of fee-in-lieu revenues on City, not private-sector, projects.
Were the City either (a) to use fee-in-lieu revenues to fund private development projects; or,
conversely (b) to no longer maintain the credit program, then the cost assumptions in the
calculation of the fee would be reflect these changes in policy.
Therefore, in light of the current market environment and the City’s housing objectives moving
forward, we recommend the City consider whether:
1. the role or levels of participation of the public and private sectors in the updated
program should be evaluated, to ensure fee expenditures remain consistent with
study cost assumptions;
2. fee-in-lieu will continue to be used solely for City projects or will be shifted at all
to private sector projects;46
3. the fee-in-lieu and AHC programs each remain an effective and viable means of
generating new affordable housing;
4. bonuses or waivers should be used to incentivize private sector participation in
the AHC program or to address issues of voluntariness; 47
5. dormitory or other housing types are appropriate forms mitigation today;
6. the geographic areas within which qualified mitigation is eligible should be
expanded or revised; and
7. the City should take on an increased role in administering and monitoring the
AHC program.
In consideration of these “big picture” items, we recommend the City proceed to Task 4 of the
project, development of a fee-in-lieu update study.
46 See Boulder County’s competitive bid process for disbursing county sales and use tax revenues to non-
profits and housing authorities, as a resource or guidance.
47 The district court, in Meyerstein v. City of Aspen, found that a deed restricted unit was the result of a
voluntary agreement, since it was entered into by the City and a private party without evidence of threat,
duress, or lack of reasonable alternatives. See No. 13CA0330, 5-6 (Jan. 20, 2014) on remand from
Meyerstein v. City of Aspen, 282 P.3d 456 (Colo. Ct. App. 2011).
69
APPENDICES
70
63
DRAFT - FOR DISCUSSION ONLY
aPPEndIx a: gloSSary and lISt of abbrEvIatIonS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
APPENDIX A: GLOSSARY AND LIST OF ABBREVIATIONS
Affordable Housing Credit (AHC) Program: The City of Aspen’s program, adopted in 2010,
encouraging private sector production of affordable housing and a market for City-issued
credits reflecting capacity created for additional FTEs. The AHC program is set forth in the City
of Aspen Land Use Code, Chapter 26.540.
APCHA: Aspen Pitkin County Housing Authority
CCI: Construction Cost Index published by ENR. CCI is built with 200 hours of common labor
at the 20-city average of common labor rates, plus 25 cwt of standard structural steel shapes
at the mill price prior to 1996 and the fabricated 20-city price from 1996, plus 1.128 tons of
portland cement at the 20-city price, plus 1,088 board ft of 2 x 4 lumber at the 20-city price.
FTE: Full-Time Equivalent. Number of full-time jobs created by market rate development, which
require new affordable unit(s).
Market-Affordability Gap: Gap between market price of a residential unit and the price that
is affordable to households with incomes being served by the locality’s affordable housing
program. This method was proposed in the 2012 study for the City of Aspen by RRC.
Cost Driven Methodology (aka Affordability Gap): This approach calculates the fee based
on the difference between total costs to develop a housing unit and the price affordable to
households with incomes being served by the locality’s affordable housing program. This is the
current City of Aspen fee-in-lieu methodology.
Employee Generation Rates. The demand for affordable housing generated from new
development; that is, the number of employees (FTEs) created by and required to be housed as
a result of an increment of new development activity. Current employee generation rates, based
on earlier studies, are set forth at § 26.470.050(E), Table 3, of the Land Use Code.
ENR: Engineering News Record. Engineering News-Record provides engineering and
construction news, analysis, commentary and data used by construction industry professionals.
ENR publishes the construction cost indices, Construction Cost Index and the Building Cost
Index.
Mitigation Requirement Rates. The percent of total number of FTE employees generated,
which each unit of new development is required to mitigate. Section 26.470.080 of the Land
Use Code sets forth the City’s current mitigation requirements for residential and nonresidential
development.
Monetary Contribution: Mitigation provided by payment of cash or other payment, including
fee-in-lieu, not including constructed units or submission and extinguishment of a credit.
Impact fee: One-time payment made at the time of development to construct system
improvements needed to accommodate the demand for public facilities for new development.
71
64
DRAFT - FOR DISCUSSION ONLY
aPPEndIx a: gloSSary and lISt of abbrEvIatIonS
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Land Acquisition Cost: Cost to purchase land (for affordable housing projects)
Construction Cost: All other costs necessary to deliver affordable housing except land
acquisition. This includes pre-development, off-site and on-site infrastructure, soft costs,
developer fee, financing costs, and construction.
Total Development Costs: All costs to develop affordable housing.
72
65
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
APPENDIX B: CASE STUDIES
Our case studies are presented here. First, an overview of the primary components of each of
the six programs summarized is provided. Next, a detailed description of each jurisdiction’s
program is presented, highlighting the elements relevant to the City of Aspen. Finally, a
matrix is presented, which summarizes the six program and describes, for each one, how the
jurisdiction addresses the following key components:
1. The title and/or statutory reference to the jurisdiction’s program;
2. Latest supporting studies;
3. Development subject to the particular program;
4. Exemptions from the program;
5. Methodology used;
6. Amount of any fees assessed, if applicable;
7. Fee collection point in the application process, if applicable;
8. Alternative options for compliance;
9. Allocation of collected revenues; and
10. Updates to the program for that jurisdiction.
1. Introduction & Overview
The following case studies contain a summary of current methodologies employed for
affordable housing fees in a sample of jurisdictions throughout the United States. These
programs include a mixture of inclusionary development policies, fee-in-lieu programs, and
linkage fees.
The programs were evaluated on the following criteria to compare to the City of Aspen’s fee-
in-lieu program: current activity of the program (active vs. inactive), methodology, amount,
update frequency, and their use of fee revenues. A summary of these findings is below with
the full case studies provided in the following section of this Appendix.
a) San Francisco
The City of San Francisco, CA has two methods of providing affordable housing, the
Affordable Housing Fee and the Jobs-Housing Linkage Fee. The Affordable Housing Fee is
part of the Inclusionary Affordable Housing Program. The Jobs-Housing Linkage fee has been
in effect since 2002 and is applied on a per unit basis. The amount of the fee is $57.14 per
square foot for projects approved before September 10, 2019 and $63.37 per square foot
for projects between that data and January 1, 2022. Fees are used for affordable housing
development and preservation, as well as permanent supportive housing.
73
66
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
b) Boston
The City of Boston, MA has the Inclusionary Development Program and Linkage Program
as their two sources for affordable housing fees. The IDP has been in place since 2000 to
support income-restricted/affordable housing and applies to proposed market-rate housing.
Boston’s Linkage program was established in 1983 and enacted into law in 1987. The
program charges $10.82 per square foot total in excess of 100,000 square feet, with $9.03
attributed to housing and $1.78 for jobs. The linkage program’s fees are split between the
City’s affordable housing and jobs funds for affordable housing and job creation. Updates are
not annual or automatic.
c) Seattle
The City of Seattle, WA has the Mandatory Affordable Housing program, a commercial
zoning linkage fee program that was adopted in November 2015. The program applies to all
new commercial development and charges an amount dependent on proposed zone and
amount of density, as further detailed in the report. The funds are used for affordable housing
production. Updates are performed yearly based on the Consumer Price Index adjustment
method.
d) Boulder
The City of Boulder, CO’s Affordable Housing Commercial Linkage fee program has been in
place since 2009 and will charge $20 per square foot for retail and $30 per square foot for
office uses by 2021. The program’s fees are attributed to affordable housing production and
updates are not yearly.
e) San Diego
The City of San Diego’s Housing Impact Fee was established in 1990 and applies to
commercial projects. The amount of determined by non-residential space multiplied by the
applicable fee for type of use, which ranges from $0.80-$2.12 (based on type). The fees are
used for workforce housing development and are not updated yearly.
f) East Palo Alto
The City of East Palo Alto has affordable housing impact fees that apply to commercial
projects and residential. The commercial fee is $10.72 per square foot, and residential
fees are between $23.25-$67.62, dependent upon housing type. The fees are used for the
provision of affordable housing units and costs of administering the program. The residential
fee is updated yearly based on percentage change in the Freddie Mac-San Francisco-
Oakland-Fremont MSA Housing Price Index.
All of the programs evaluated use the same cost-driven methodology as the City of Aspen to
calculate their fees.
74
67
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Most operate in high-cost areas and have implemented affordable housing fees as part of a
larger housing strategy.
A key distinction is that several programs apply only to commercial developments as a
“linkage” fee connecting the creation of jobs from nonresidential development—at a range of
income levels—to the need for affordable housing.
Most fees include a provision for regular updates to fee schedules, however the
methodologies vary.
Other similarities among the programs include the use of funds for direct affordable housing
development or preservation and the opportunity to mitigate impacts using alternative
approaches such as constructing housing on- or off-site.
2. Case Studies Detail
a) San Francisco, CA: Affordable Housing Fee and Jobs-Housing Linkage Fee
• Active program: Programs are both active
• Methodology:
o Both fees: Cost-Driven Approach 48(total development cost less revenue
from rents, mortgage payments, other sources; calculation is based on City
subsidy)
o The maximum Affordable Housing Fee per residential square foot is
calculated using costs to construct affordable housing (development and
land) (validated using certified costs from the Mayor’s Office of Housing and
Community Development (MOHCD)) less revenue from unit sales or revenue
o The maximum Jobs Housing Linkage Fee per square foot of nonresidential
gross floor area is determined by a nexus analysis that multiplies
Affordable Unit Demand Factor (e.g., the number of affordable units
demanded from the nonresidential development)
by the required net subsidy to deliver each unit of affordable housing
in San Francisco (“affordability gap (construction costs)”) and
48 It is noted that where the methodology/approach is labeled as “Cost Driven” in this document, the
technical term in supporting studies (e.g., nexus studies) is the “Affordability Gap” methodology. However,
to simplify the discussion herein, we relabel this methodology as “Cost Driven” to distinguish between the
original City of Aspen methodology, called “Market-Affordability Gap” (i.e., the gap between a market value
purchase price and an affordable purchase price), and these methodologies that use total development
costs (i.e., land, construction, and soft costs) as the basis to derive affordable housing fees (and the gap
between costs and available revenues from the unit).
75
68
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
then dividing by 1,000 square feet. (Per the nexus study, the
maximum amounts are not meant to be recommended amounts but
the result of the analysis.)
• Amount:
o Affordable Housing Fee: Assessed on residential development: $210.47
per square foot of Gross Floor Area; applied to applicable percentage
of projects (from 20 to 33 percent) based on size and ownership style of
project. The San Francisco program shifted to a fee per square foot from a
fee per dwelling unit.
o Jobs-Housing Linkage Fee: Assessed on nonresidential development:
$57.14 per square foot for projects approved before September 10, 2019
and $63.37 per square foot for projects submitted between then and
January 1, 2022.
• Use of Fee Revenues: Affordable housing development, preservation and
permanent supportive housing
• Yearly updates:
o Affordable Housing Fee: Mayor’s Office of Housing and Community
Development annually adjusts the fee based on actual cost to subsidize
affordable housing units over the past three years. Each year the analysis is
updated to include new projects from the most recent year and drop older
projects that no longer fall into the three year period of analysis. (Other
development impact fees in the City are adjusted by the City Controller.)
o Jobs Housing Linkage Fee: Mayor’s Office annual adjusts the fee based on
actual cost to subsidize affordable housing units over the past three years.
Each year the analysis is updated to include new projects from the most
recent year and drop older projects that no longer fall into the three year
period of analysis. (Other development impact fees in the City are adjusted
by the City Controller.)
The City of San Francisco has the Inclusionary Affordable Housing Program (Section 415
of the Planning Code) that requires all residential projects of 10 or more dwelling units to
pay the Affordable Housing Fee, or elect an alternative method of compliance, including
providing affordable units on-site, off-site, or via the land dedication or small sites option in
certain cases. The program has been in effect since 2002 and is governed by the Planning
Code Section 415 and Inclusionary Housing Program Procedures Manual, administered by
the Mayor’s Office of Housing and Community Development (MOHCD).
76
69
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
As of January 2019, the Affordable Housing Fee is applied on a Gross Floor Area basis to
ensure that MOHCD actual costs to construct the required amount of off-site affordable
housing is appropriately and equitably captured from all projects, regardless of the size and
number of units distributed within the project. MOHCD, in consultation with the Planning
Department, converts MOHCD’s per unit cost to a per-square-foot fee, based on the average
residential Gross Floor Area of projects that have paid the fee in the past three years. The fee
amount indicated below has been calculated based on those standards.
The current Affordable Housing Fee is $210.47 per square foot of Gross Floor Area of residential
use that is applied to the applicable percentage of projects in the following categories:49
»Small Projects (fewer than 25 dwelling units): 20% of the project’s
Gross Floor Area of residential use (e.g., 20 percent of market rate
gross floor area x current fee per square foot)
»Large Projects (25 or more units) Rental: 30% of the project’s
Gross Floor Area of residential use
»Large Projects (25 or more units) Ownership: 33% of the project’s
Gross Floor Area of residential use
In addition to the Inclusionary in-lieu fees generated from the Affordable Housing Fee,
San Francisco also leverages the Jobs-Housing Linkage Fee (JHLF) on nonresidential
development for affordable housing development. The Jobs-Housing Linkage fee was
named based on the imbalance between housing affordability and the jobs and wage levels
being created by the city’s economic conditions. It is meant to convey the funding source
as a potential solution. JHLF has been in place since 1996 and is triggered by an increase
of 25,000 GSF or more of any combination of entertainment, hotel, integrated PDR, office,
research and development, retail, and small enterprise workspace uses. If the JHLF is not
paid, the option exists to fund off-site affordable housing or pay in-lieu fees. In-lieu fees are
calculated per GSF on two different fee schedules for net additions of GSF and replacement
of use or change of use for properties.
The JHLF program is controlled by the Planning Department and MOHCD. Fees are assessed
by gross square foot of nonresidential development, which varies by type of nonresidential
land use. The city has collected a yearly average of $7.5 million from the fees to fund
affordable housing projects. However, the fee has not been updated in some time. The city
conducted an update to its 1997 nexus study in May 2019 to assess what a new rate could
be for the fee.
In October 2019, the San Francisco Board of Supervisors approved an increase to the
development fees for new commercial space from the previous amount to $57.14 for projects
approved before September 10, 2019 and $63.37 for projects submitted between then and
January 1, 2022. This increase has been somewhat controversial, as it more than doubled
the fee. In addition, an economic impact report produced by the city states that while the
49 https://sfplanning.org/sites/default/files/forms/Impact_Fee_Schedule.pdf
77
70
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
fee could generate an additional $8 million to $9 million annually on top of the current $12.3
million baseline, the city is projected to lose 125,000 to 140,000 square feet of office space
annually from its baseline of 430,000 square feet a year due to the impacts from the fee. That
equals a net job loss of 1,275 and 1,500 over the next 20 years.
Resources:
Keyser Marston Associates, Inc., “Jobs Housing Nexus Analysis: San Francisco, California,”
May 2019.
San Francisco Planning Department, “Planning Code Text Amendment, Jobs Housing
Linkage Fee,” Hearing Date September 19, 2019. https://commissions.sfplanning.org/
cpcpackets/2019-011975PCA.pdf
San Francisco Planning Department, “Planning Director Bulletin No. 1, An Overview of
Development Impact Fees,” December 2014 (revised April 2016).
https://default.sfplanning.org/publications_reports/DirectorsBulletin01_Impact_Fees-
April2016.pdf
City and County of San Francisco Mayor’s Office of Housing and Community Development,
“Inclusionary Affordable Housing Program: Monitoring and Procedures Manual, October
11, 2018. https://sfplanning.org/sites/default/files/documents/legis/inclusionary-affordable-
requirements/Inclusionary%20Affordable%20Housing%20Program%20Manual.pdf
San Francisco Citywide Development Impact Fee Register (Updated as of December 1, 2019,
rates effective as of January 1, 2020). https://sfplanning.org/resource/development-impact-
fee-register
City of San Francisco, Current Impact Fee Schedule https://sfplanning.org/sites/default/files/
forms/Impact_Fee_Schedule.pdf
b) Boston, MA: Inclusionary Development Program and Linkage Program
• Active program: Currently active; second largest source of funding for
affordable housing collected through linkage policy.
• Methodology:
o Cost-Driven Approach (total development costs less rental or mortgage
revenue)
o Linkage fee was established in 1987; initial methodology unknown.
o Updated program in 2018 was determined by the Cost-Driven Approach,
with fee calculated based on the cost to fill the financing gap between
the cost to develop an affordable housing unit and the amount of
78
71
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
financing supported by income from rents and sales by 20-25%
• Amount:
o $10.81/sq. ft. total of GFA in excess of 100,000 sq. ft, broken down as:
$9.03 for housing and
$1.78 for jobs
• Use of fee revenues:
o Housing and job creation
o The fee is split between housing and job linkage contributions, meaning
that the revenue from the fund goes to the Neighborhood Housing Trust &
Neighborhood Jobs Trust, Boston’s accounts for affordable housing and job
creation
• Yearly updates:
o Not annual or automatic.
o Increases may occur every 3 years to reflect rise in inflation based on CPI.
o Recent Home Rule Petition (2019) gives the city more flexibility in annual
adjustments to align more closely with market, unclear what that will be yet.
The City of Boston has had the Inclusionary Development Policy (IDP) since 2000 to support
income-restricted/affordable housing through the leveraging of private development. The
IDP applies to any proposed market-rate housing development (and is not assessed on
nonresidential development) that has ten or more units and (a) requires zoning relief; or (b) is
financed by the City, or (c) is built on property owned by the City.
Since Boston’s program relies on mitigation provided by new development, the IDP’s success
relies on private development of housing and when it slows (as it did in the last recession) few
new affordable units are created. The City set IPD requirements at ten or more units to ensure
that creation of income-restricted units would continue without discouraging developers from
building market rate housing. Through IDP, developers have contributed $137.1 million to the
IDP Fund and supported the completion or preservation of 1,414 additional units of housing.
79
72
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 11. City of Boston 2015 Inclusionary Development Policy Requirements, by Zone
Source: Boston Planning and Development Agency (BPDA), Bridging the Gap: Creating Income Restricted Housing through
Inclusionary Development, 2018 Annual Report
Boston’s Linkage Program was established in 1983 and enacted into law in 1987. The fund
provides funds for both affordable housing and job training. The linkage payments are made
by developers either upon the issuance of a certificate of occupancy or 24 months after the
issuance of a building permit (whichever comes first), on projects that initially required zoning
approval. Linkage payments are split into two funds – the Neighborhood Housing Trust (NHT)
and Neighborhood Jobs Trust (NJT).
Developers are currently required to pay linkage fees that total $10.01 after the first 100,000
square feet, with $9.03 per square foot designated for housing and $1.78 for job training.
Developers can make linkage payments in 7 equal annual installments or they can create
housing in an amount equal to the cash requirement. From FY06 to FY15, the Linkage
Program generated over $51 million for affordable housing which contributed to the creation
of 2,181 new affordable units.
Previously, the fee could only be increased on three-year cycles to reflect the rise in inflation
based on the Consumer Price Index and on economic, housing, and employment trends. In
September 2019, the Mayor signed “An Act to Further Leverage Commercial Development
to Build Housing, Create Jobs, and Preserve Inclusionary Development”. This is known as a
“Home Rule Petition” and it will enable the City of Boston to have more flexibility through the
Linkage Program and is also designed to codify the IPD in Boston’s Zoning Code to protect
the City’s ability to create and fund income-restricted housing. The Home Rule Petition
would allow Boston to adjust the payment and program guidelines for the Linkage Program
80
73
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
and align them more closely with the market. This locally-approved legislation needs to be
approved by the Massachusetts Legislature.
Resources:
Karl F. Seidman Consulting Services and ConsultEcon, Inc., “Linkage Nexus Study Final
Report to Boston Planning and Development Agency, December 2016, http://www.
bostonplans.org/getattachment/b883ad7f-fc1f-4c83-ac88-1334e519742d
Boston Planning and Development Agency (BPDA), “Bridging the Gap: Creating Income
Restricted Housing through Inclusionary Development, 2018 Annual Report.” http://www.
bostonplans.org/getattachment/fb05806a-d218-4a3b-bdef-e1221d7159d3
Memo to Boston Planning and Development Agency (BPDA), “Article 80: Development Project
Exactions,” June 14, 2018. http://www.bostonplans.org/getattachment/d5bdbc68-e7d1-
4784-b3c5-3b1d53573dcc
Boston Planning and Development Agency (BPDA), “Boston’s Inclusionary Development
Policy: Leveraging Private Development for Affordable Housing,” presentation, Nd. http://
www.bostonplans.org/getattachment/43eefea6-85ae-48ee-965a-6358ea84bc7e
Boston Redevelopment Authority, “Inclusionary Development Policy,” presentation, December
8, 2015. https://jpndc.org/wp-content/uploads/2014/12/City-Presentation-for-IDP-Rollout_
December-2015.pdf
c) Seattle, WA: Mandatory Housing Affordability-Commercial (MHA) Program
• Active program: Program is active; however, data is not available on collections
due to its newness.
• Methodology: 50
o Cost-Driven Approach (total development cost less rental or mortgage
revenue )
o The maximum amount of the city’s linkage fee was determined by a nexus
study in 2015 that utilized the affordability gap methodology.
o The per unit subsidy required to make new housing affordable to households
at target income levels was calculated by
subtracting per unit development costs
from the per unit mortgage supportable from affordable rents.
o The adopted fee is less than the maximum.
50 Seattle Developer Contributions - MHA
81
74
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
o Fee is assessed on nonresidential, multifamily development, and live-work
development
• Amount: Dependent upon zone and amount of density, as well as residential vs.
commercial
o Commercial
Direct formula for calculation is (X-Y) x Z = Payment
• X is the total chargeable floor area in commercial use,
• Y is the chargeable floor area excluded from the calculation
and
• Z is the payment calculation amount per square foot
o Residential
[(X1 + X2) – Y] x Z = Payment
• X1 is the total gross floor area in residential use,
• X2 is the total gross floor area of live work units,
• Y is the floor area of residential/live-work parking located
underground excluded from calculation,
• Z is the payment calculation amount per square foot
• Use of fee revenues: No data yet for current MHA program; previous program
produced affordable units
• Yearly updates: CPI adjustment method
In 2001, the City of Seattle began using incentive zoning as a voluntary version of inclusionary
zoning and was applied to commercial buildings downtown. Over the decade, the program
expanded to include several downtown neighborhoods and residential development. Incentive
zoning allowed developers to build at greater height and density in the faster growing areas
of the city, in exchange for paying a fee for each additional square foot of floor space granted
by the program. The fees collected under the incentive zoning law were to be used to
support the production of affordable housing by non-profit builders. However, the number of
affordable units produced under the provision were insufficient, with only 714 affordable units
developed from 2001 to 2014.
To address this issue, in 2015 the Seattle City Council began considering proposals for a
mandatory linkage fee on all multifamily residential and commercial development citywide
(which would exclude 65 percent of the city zoned exclusively for detached single-family).
The proposed policy would have required payments ranging from $5 to $22 per square foot,
or a set-aside of 3 to 5 percent of units for affordable housing under 80 percent of area
median income (AMI). The proposed program would include no provision for additional zoning
82
75
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
capacity as the incentive zoning did.
The proposed linkage fee encountered legal challenges from a group of Seattle developers
asserting that the fees was impractical and illegal under state law unless the fees were
voluntary and were needed to mitigate the impact of specific projects. The City recognized
that the proposal was likely to have only a 50 percent chance of surviving a legal challenge
based on the “taking” clause. Given this, the City embarked on a different direction and
began pooling policy recommendations from a created task force called the Seattle Housing
Affordability and Livability Agenda (HALA) committee. This committee created the Mandatory
Housing Affordability-Commercial (MHA) Program.
The MHA Program is Seattle’s current commercial linkage fee program and was adopted in
November 2015. The MHA Program is applied to all new commercial development as well as
a mandatory inclusionary zoning program. It is different from the incentive zoning program
in the sense that the program is implemented for any development that the City Council has
approved for a rezone that:
»increases maximum height or floor area ratio (FAR) limits or
»establishes a different zoning designation.
MHA applies to both City-initiated legislative rezones and applicant-initiated rezones.
The zoning code for the MHA Program allows for three options in providing affordable
housing:
»an onsite and offsite performance option
»fee-in-lieu option
»combination of the two
The amount of affordable housing required is first determined by zone and then square
footage of the proposed commercial space. For the first time in the City, this program would
require new multifamily and commercial development to contribute to affordable housing, as
well as increase development capacity wherever requirements were imposed.
When the MHA Program was first enacted, it received a fair amount of criticism, particularly
from the Seattle Coalition for Affordability, Livability and Equality (SCALE) which claimed
that implementation of MHA negatively affected individual neighborhood plans by increasing
bulk and scale in neighborhood areas. A judge ruled in favor of MHA in 2018, though the
plan made small changes in reference to historic preservation of areas. As of March 2019,
the Seattle City Council has voted to advance the policy. The City expects the program will
generate $380 million in revenue from the payment option and approximately 1,325 units over
the next 20 years.
83
76
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Figure 12. City of Seattle MHA Zone Requirements51
However, concerns still exist regarding preservation of neighborhood scale, and residents are
calling for modifications to MHA that incorporate anti-displacement measures. Low affordable
housing/in-lieu fees required of developers are viewed as inadequate to discourage increasing
land values for speculative development in many neighborhoods, especially places that have
been designated as at risk for high displacement. In addition, increased zoning capacity
creates a tipping point for price increases and speed of land sales, with purchase prices
potentially well over asking price and appraised values. The concern is that non-profit
developers and community-based groups will be unable to compete in the market.
Community groups (such as SCALE) have recommended revisions to the program such as:
1. Reevaluation of the MHA percent designation for neighborhoods with high
displacement risk.
2. Direct in-lieu fees generated from neighborhoods with high displacement risk
back to those neighborhoods.
51 The figure summarizes the current payment requirements. The MHA zone suffixes identify zones where
MHA applies (essentially areas where City Council has approved a rezone or established a different zoning
regulation, triggering the MHA). An “M” applies to standard zoning changes; “M1” is when a rezone is not a
standard zoning change and results in a zone in the next highest category (e.g., a lowrise 1 zone becomes a
lowrise 3). “M2” is when a zone moves two or more categories higher (e.g., a single-family zone becomes a
lowrise zone). Low, medium, and high areas correspond to location in a low, medium, or high development
capacity area for higher performance and payment options. The chart combines the performance and
payment options, with the percentages reflecting the share of units that must be set aside as affordable
housing for that particular category. The dollar amount is the payment option amount per square foot.
84
77
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
3. Determine a permanent and adequate funding source for equitable development
funds.
4. Develop a district-wide online notification system to alert stakeholders to new
development activity in their neighborhoods.
5. Commit to developing policy and funding to support affirmative marketing, right
to return, or preference policies in neighborhoods
6. Create a comprehensive strategy to help keep low-income or fixed income
single family homeowners in place.
7. Create a temporary City-wide anti-displacement voucher program to help
residents stay in place while MHA units are still under construction.
8. Update the “Seattle Housing Levy Administrative and Financial Plan,” for MHA
fund distribution.
9. Develop and implement zoning overlay districts that preserve existing
institutions and businesses.
Given the legal battles and modifications to the program, funds have not yet been collected.
Resources:
David Paul Rosen & Associates, Seattle Affordable Housing Nexus Study and Economic
Impact Analysis (Administrative Review Draft), May 13, 2015
https://www.seattle.gov/Documents/Departments/Council/Issues/Seattle_R_Nexus-
ARD-051315.pdf
“How MHA Works,” March 2019 https://www.seattle.gov/Documents/Departments/HALA/
Policy/How_MHA_Works.pdf
Seattle Department of Construction and Inspections, “Seattle Permits: Tip 257, Developer
Contributions: Mandatory Housing Affordability, May 23, 2019. http://www.seattle.gov/DPD/
Publications/CAM/Tip257.pdf
d) Boulder, CO: Affordable Housing Commercial Linkage Fee
• Active program: Program is active
• Methodology:
o Cost-Driven Approach (total development cost less revenue from rents,
mortgage payments, other revenue such as tax credits)
• Amount:
o Depends on land use
o Fee schedules are slated to increase to $20/square foot for retail and $30/
85
78
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
square foot for office by 2021
• Fee Revenues: Provision of affordable housing
• Yearly updates: Unclear; most recent update in 2018 (which was more policy
driven).
Boulder’s Affordable Housing Commercial Linkage Fee (first adopted in 2009) is used to
fund additional affordable housing and is assessed on any project with a non-residential
component. All funds are directed to the city’s affordable housing fund. The fee was first
adopted as an optional program for non-residential developers. Projects within the downtown
zoning district could pay into the city affordable housing fund and in exchange receive a
boost in the amount of building floor space allowed on a parcel. Over its lifetime, Boulder has
collected approximately $6.9 million for affordable housing, including almost $1.6 million paid
or invoiced in 2019.
In 2016, the City revised its Commercial Linkage Fee with a full updated nexus study and
process. The methodology used was a market-affordability gap analysis. An overview of the
nexus study approach is shown below in Figure 13.
Figure 13. City of Boulder Graphic Representation of Nexus Study Approach
Source: City of Boulder, City Council Agenda Item, Discussion and direction regarding potential revisions to the
affordable housing commercial linkage fee, February 20, 2018.
Legally supportable amounts by nonresidential land use were calculated using the market-
affordability gap methodology and were meant to represent the total cost to mitigate the
need to mitigate affordable housing impacts from nonresidential development. Nexus studies
may result in fee amounts considered by the community to be too high to be adopted at the
maximum amounts. This was the case in Boulder so options were presented to City Council
considering modifications based on economic and market conditions, housing policy goals,
commuting adjustments, and comparable community assessments.
In 2016, City staff recommended $15 per square foot for office use (from a maximum
86
79
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
defensible fee of $58.40 per square foot). The Council adopted a $12 per square foot fee on
office (with rates on the other nonresidential land uses scaled commensurately).
At the time of the 2016 nexus study, the City also had an Affordable Housing Excise Tax that
was assessed on all residential and nonresidential development. The Housing Excise Tax was
repealed at the same time the Linkage Fee was adopted.
In May 2018, Boulder City Council adopted phased changes to the affordable housing
commercial linkage fee from $12 per square foot to $30 per square foot by 2021 for office
uses, a 150 percent increase from the previously adopted fee. For 2019, the fee increased to
$18 and will be $24 in 2020. The fee increase puts Boulder’s fee just behind San Francisco
and Palo Alto’s fees, which are the highest in the country at $57 and $35 per square foot,
respectively.
The linkage fee is assessed by type of nonresidential development, with office being the
highest. Qualified non-profits are eligible for reduced rates and developments that propose
affordable commercial space are eligible for reduced rates. A new broad class titled
“Affordable Commercial” was created for owners of new commercial space that choose
to restrict commercial space to be “affordable.” Additional information on the affordable
commercial space program is yet to be determined.
Figure 14. City of Boulder Affordable Housing Commercial Linkage Fee: Phased-In Rates (2018)
2018 2019 2020 2021
Office 12.41$ 18.27$ 24.14$ 30.00$
Retail/Restaurant 8.27$ 12.18$ 16.09$ 20.00$
Hospital 8.27$ 12.18$ 16.08$ 20.00$
Institutional 4.14$ 6.09$ 8.05$ 10.00$
Warehousing 4.14$ 6.09$ 8.05$ 10.00$
Light Industrial 7.24$ 10.66$ 14.08$ 17.50$
As of 2019, experts on the city’s real estate market are concerned that the expense to new
projects may cause a slowdown in commercial development in Boulder. Local business
leaders, landlords, and developers have expressed concern that these increases could
have the unintended effect of pushing small companies out of Boulder and leave the door
open only to large corporations. Business leaders are also concerned that homes produced
with linkage fee revenue may end up being more expensive as a result of the costs to build
nonresidential development. The assumption is that if fees price smaller businesses out or
preclude them from entering the city and only larger companies remain with the ability to
87
80
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
absorb higher costs of living, overall AMI will rise. However, accurately gauging the full impact
of the increase on the city’s business climate and housing market will not be possible until a
few years after it takes effect.52
Resources:
Keyser Marston Associates, “2016 Jobs Housing Nexus Analysis in support of Non-
Residential Affordable Housing Impact Fees for City of Boulder,” September 20, 2016.
https://www-static.bouldercolorado.gov/docs/Boulder_Jobs_Housing_Nexus_Analysis_
Report_9-20-2016-1-201705261142.pdf?_ga=2.85140048.852778678.1582147481-
768681854.1578065155
City of Boulder, “City Council Agenda Item: Discussion and direction regarding potential
revisions to the affordable housing commercial linkage fee,” February 20, 2018. Available at
https://bouldercolorado.gov/plan-develop/development-impact-fees-excise-taxes
City of Boulder City Council, “Study Session Packet: Development-Related Impact Fees
and Excise Taxes,” April 12, 2016. Available at https://bouldercolorado.gov/plan-develop/
development-impact-fees-excise-taxes
e) San Diego, CA: Housing Impact Fee
• Active program: Program is active
• Methodology:
o Cost-Driven Approach (total development costs less revenue from rents,
mortgage payments, other sources (e.g., tax credits);)
o Methodology is reflective of
actual cost to construct units (assuming use of tax credits) and
what households can afford at various income levels producing an
offsetting revenue stream.
• Amount:
o GSF non-residential space multiplied by the applicable fee by type of use
o ($2.12 for office, $1.28 for hotel, $0.80 for R&D, $1.28 for retail).
o Interior remodel fees for the new use less any fees paid (or would have been
paid) based on existing use of building
52 “Upcoming fee hikes on Boulder commercial construction latest headwind facing developers” - https://www.
dailycamera.com/2019/12/21/upcoming-fee-hikes-on-boulder-commercial-construction-latest-headwind-
facing-developers/
88
81
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
• Use of fee revenues: Workforce housing
• Yearly updates: N/A
The City of San Diego’s Housing Impact Fee was established in 1990 and is a commercial
linkage fee charged to commercial development to help finance affordable housing for low-
income workers whose jobs were created by commercial, industrial, or retail development.
Developers are able to dedicate land or air rights in lieu of the fee if fair market value is equal
or greater than the amount of the fee required.
The Affordable Housing Fund is comprised of revenues from Housing Impact Fees and
funds from the Inclusionary Housing Fund, which are residential development fees and loan
repayments. The fund has an annual plan that addresses how fund revenues are designated,
and the FY2020 plan reports the housing impact fees at $11.4 million (though this amount
does include some loan repayments). The funds are earmarked for rental housing production
and homeless housing initiatives.
Resources:
Keyser Marston Associates, “Jobs Housing Nexus Study for City of San Diego,” August 2013.
https://www.sdhc.org/uploadedFiles/Real_Estate/Best_Practices_Task_Force/SDHC%20
Job%20Housing%20Nexus%20Study%202013(1).pdf
San Diego Municipal Code, Chapter 9, Article 8, Division 6: Housing Impact Fees on
Commercial Development. https://docs.sandiego.gov/municode/MuniCodeChapter09/
Ch09Art08Division06.pdf
San Diego Municipal Code, Chapter 14, Article 2, Division 13: Inclusionary Affordable Housing
Regulations. https://docs.sandiego.gov/municode_supp/750/Chpt%2014%20Art%202%20
Division%2013,%20Pages%201-12.pdf
San Diego Development Services Department, “Information Bulletin 532: Requirements for
Inclusionary Affordable Housing,” July 2019. https://www.sandiego.gov/sites/default/files/
dsdib532_new.pdf
f) East Palo Alto, CA: Affordable Housing Impact Fees
• Active program: Program is active
• Methodology:
o Cost-Driven Approach (total development costs less revenue from rents,
mortgage payments, other sources (e.g., tax credits).
• Amount
o Commercial Linkage Fee: $10.72/sq. ft.
89
82
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
o Residential Impact Fee for Affordable Housing:
Rental: $23.35 per/sq. ft
Ownership (per sq. ft)
• Single Family Infill: $36.22
• Townhome: $34.78
• Stacked Flat Condo (inside business district): $50.98
o Stack Flat Condo (outside business district): $67.62
• Use of fee revenues: Provision of affordable housing units, supportive services
and costs of administering Affordable Housing Program Ordinance
• Yearly updates
o Residential fee updated yearly for residential projects
Ownership: Based on percentage change in the three-year trailing
Freddie Mac San Francisco-Oakland-Fremont MSA House Price Index
Rental: Fee adjusted annually based on the annual percentage
change in median rents by bedroom count in the City, averaged
across unit sizes, as documented by the City’s rent stabilization
program
o Commercial: N/A
The East Palo Alto Affordable Housing Impact Fee was passed in July 2014. The new
ordinance repealed the City’s Below Market Rate Housing Program and replaced it with
an Affordable Housing Program ordinance that subjects each new market-rate unit in a
residential project to an affordable housing impact fee, adjusted yearly for market fluctuations.
The Below Market Rate Housing Program, adopted in 1994, did not include a fee for
affordable housing and was largely dependent on redevelopment agency funding.
Resources:
City of East Palo Alto, Ordinance No. 397, Chapter 8.5.5, “Affordable Housing Impact Fee for
Nonresidential Development.” http://www.ci.east-palo-alto.ca.us/DocumentCenter/View/4258
City of East Palo Alto, Res. No. 4539, “Affordable Housing Impact Fee for Residential
Development.” http://www.ci.east-palo-alto.ca.us/DocumentCenter/View/4260
City of East Palo Alto, “Current Fee Schedule for Affordable Housing Impact Fees - FY
2018/2019,” http://www.ci.east-palo-alto.ca.us/DocumentCenter/View/4259
90
83
DRAFT - FOR DISCUSSION ONLY
aPPEndIx b: caSE StudIES
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
City of East Palo Alto, “Development Impact Fee Program Nexus Study,” February 28, 2019.
Available at http://www.ci.east-palo-alto.ca.us/index.aspx?NID=665
David Paul Rosen and Associates, “City of East Palo Alto Affordable Housing Nexus Study,”
2014. http://www.cityofepa.org/DocumentCenter/View/733
91
84
DRAFT - FOR DISCUSSION ONLY
Appendix B: CAse studies
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
3. Case Study Comparison Tables
The following summarizes the detailed descriptions of the six affordable housing programs
reviewed above. A summary of Aspen’s current program is first. The other six jurisdictions
follow.
Aspen, CO
Title Affordable Housing Fee-in-Lieu
Ordinance/Legislation Land Use Code Section 26.470.100.A
Latest Supporting Studies
Affordable Housing Fee Methodology City of
Aspen/Pitkin County/APCHA (2012);
background City Council items by staff to
ultimately set the Fee in Lieu
Developments Subject to Regulation All private sector property developments
Exemptions N/A
Methodology Total development costs minus sales and rental
revenue costs per FTE
Fee Amount
Range of $111,000 - $381,000 per full time
employee on average (dependent upon
category of housing)
Fee Collection In coordination with construction of other
development; used for partial impacts
Alternative Options*
Construction of on-site or off-site deed-
restricted housing units, use of Affordable
Housing Credit Program, APCHA approved buy-
down units
Revenue Allocation Affordable housing development
Collections Approximately $10 million between 2010-2018
Updates Every 5 years; last update based on national
ENR Construction Cost Index
92
85
DRAFT - FOR DISCUSSION ONLY
Appendix B: CAse studies
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
San Francisco, CA
Title Jobs-Housing Linkage Fee (1996); Affordable
Housing Fee (2002)
Ordinance/Legislation
Jobs-Housing Linkage Fee: Article 4, Planning
Code Section 413; Affordable Housing Fee:
Article 4, Planning Code Section 415
Latest Supporting Studies Jobs Housing Nexus Analysis by Keyser Marston
Associates (2019)
Developments Subject to Regulation
Jobs-Housing: Commercial developments over
25,000 Gross Square Feet; Affordable Housing:
All residential projects of 10 or more dwelling
units
Exemptions
Jobs-Housing: Free-standing pharmacies
exceeding 50,000 sq ft; free-standing general
grocery exceeding 75,000 square ft; any mixed-
use space consisting of residential and pharmacy
space that exceeds 50,000 square ft.
Methodology
Both Fees: Cost Driven Approach (Affordability
Gap (Total Development Costs less Revenues)):
Fee is reflective of actual cost to construct units
less revenue from the sale or rental of the unit.
Affordable Housing Fee recently changed from a
"per unit" fee to a "per square foot" fee
Fee Amount
Jobs-Housing: $57.14 per SF for projects
approved before September 10, 2019 and
$63.37 per SF for projects submitted between
then and January 1, 2022. Affordable Housing:
$210.47 per square foot of Gross Floor Area of
residential use
Fee Collection Prior to issuance of a building or site permit
Alternative Options*Construction First: In-lieu fee or land
contribution equivalent to in-lieu fee
Revenue Allocation Affordable housing development, preservation
and permanent supportive housing
Collections Yearly average of $7.5 million fees
Updates
Actual construction costs for past 3 years on a
rolling basis done by Mayor's Office of Housing
and Community Development.
93
86
DRAFT - FOR DISCUSSION ONLY
Appendix B: CAse studies
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Boston, MA
Title Development Impact Exaction Policy (1987)
Ordinance/Legislation Zoning Code Section 80 B-7
Latest Supporting Studies Linkage Nexus Study by Karl F. Seidman
Consulting Services (2016)
Developments Subject to Regulation
Any project requiring zoning changes and
proposing to include one or more commercial
uses occupying more than 100,000 gross square
feet
Exemptions N/A
Methodology
Cost Driven Approach (Affordability Gap (Total
Development Costs less Revenues)): Fee is
reflective of actual cost to construct units less
revenue from the sale or rental of the unit
Fee Amount $10.81 per square foot of gross square area
total - $9.02 for housing & $1.78 for jobs
Fee Collection
Seven annual installments, first due upon the
issuance of a certificate of occupancy or 24
months after the issuance of a building permit,
whichever comes first
Alternative Options*
Fee First: Creation of housing units in
compliance with Housing Creation Option,
creation of a job training program in compliace
with Jobs Creation Option
Revenue Allocation Affordable housing development & job creation
Collections Generated $31 million from 2014-2018, creation
of 2,181 new affordable units from FY06-FY15
Updates Not annual or automatic, may occur every 3
years to reflect rise in inflation
94
87
DRAFT - FOR DISCUSSION ONLY
Appendix B: CAse studies
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Seattle, WA
Title Mandatory Housing Affordability-Commercial
(MHA) Program (2015)
Ordinance/Legislation Land Use Code Chapter 23.58B
Latest Supporting Studies Seattle Affordable Housing Nexus Study by
David Paul Rosen & Associates (2015)
Developments Subject to Regulation
All new commercial development that the City
Council approves for a rezone to increase
maximum height or floor area ratio; any
development establishing a different zoning
designation
Exemptions
Structures containing commercial uses that also
contain floor area in residential use that is
publicly funded or has received allocation of
federal low-income housing tax credits
Methodology
Cost Driven Approach (Affordability Gap (Total
Development Costs less Revenues)): Fee is
reflective of actual cost to construct units less
revenue from the sale or rental of the unit
Fee Amount Range between $6-$36 dependent upon
location and scaling
Fee Collection At time of Master Use Permit application and
first building permit application
Alternative Options*Fee First: Inclusion of rent-restricted units in
proposed development
Revenue Allocation Affordable housing development
Collections Not yet calculated for current iteration of
program, recently advanced in 2019
Updates Annually, CPI adjustment method
95
88
DRAFT - FOR DISCUSSION ONLY
Appendix B: CAse studies
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
Boulder, CO
Title Affordable Housing Commercial Linkage Fee
(2016)
Ordinance/Legislation Boulder Municipal Code, §4-20-62. Capital
Facility Impact Fee.
Latest Supporting Studies
Final Affordable Housing Nexus Analysis by
Keyser Marston Associates (2016), Capital
Facility Development Impact Fee Study by
TischlerBise (2009)
Developments Subject to Regulation Any project with a non-residential component
Exemptions
Public or civic use with mission that will
predominately and directly serve Boulder
County residents
Methodology
Cost Driven Approach (Affordability Gap (Total
Development Costs less Revenues)): Fee is
reflective of actual cost to construct units less
revenue from the sale or rental of the unit; and
tax credits where applicable
Fee Amount
Varies by type of nonresidential development;
fee amounts are slated to increase to $10/sq. ft.
(warehouse), $20/sq. ft. (retail), and $30/sq. ft.
(office) by the year 2021
Fee Collection Upon submission of building permit application
Alternative Options*Construction First: In-lieu fee
Revenue Allocation Affordable housing development
Collections $6.9 million for affordable housing since
inception, including $1.6 million in 2019
Updates Unclear, most recent update in 2018; policy
driven
96
89
DRAFT - FOR DISCUSSION ONLY
Appendix B: CAse studies
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
San Diego, CA
Title Housing Impact Fee (1990)
Ordinance/Legislation Municipal Code Section 98.0610
Latest Supporting Studies Jobs Housing Nexus Study by Keyser Marston
Associates (2013)
Developments Subject to Regulation Nonresidential development projects proposing
construction, addition or interior remodeling
Exemptions
Projects which are the subject of development
agreements currently in effect with the city,
single room occupancy development, portion of
any development project located on state
owned property, non-residential uses in
Southeast/Barrio Logan Enterprise Zone
Methodology
Cost Driven Approach (Affordability Gap (Total
Development Costs less Revenues)): Fee is
reflective of actual cost to construct units less
revenue from the sale or rental of the unit; and
tax credits where applicable
Fee Amount
Gross square footage of non-residential space x
applicable fee by type of use ($2.12 for office,
$1.28 for hotel, 0.80 for R&D, $1.28 for retail)
Fee Collection At time of building permit issuance
Alternative Options*Construction First: Land or air rights in lieu of
fee
Revenue Allocation Affordable housing development
Collections $11.4 million in 2019
Updates Unknown
97
90
DRAFT - FOR DISCUSSION ONLY
Appendix B: CAse studies
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
East Palo Alto, CA
Title Affordable Housing Impact Fee (2014)
Ordinance/Legislation Municipal Code Chapter 18.38 (Residential),
Chapter 18.40 (Nonresidential)
Latest Supporting Studies Development Impact Fee Program Nexus Study
by David Monniaux (2018)
Developments Subject to Regulation
All nonresidential development projects and
new market rate "for sale" and "rental
development
Exemptions N/A
Methodology
Cost Driven Approach (Affordability Gap (Total
Development Costs less Revenues)): Fee is
reflective of actual cost to construct units less
revenue from the sale or rental of the unit; and
tax credits where applicable
Fee Amount $10.72 per square foot for commercial; a range
of $23-$68 for residential, dependent upon type
Fee Collection Due at issuance of first permit
Alternative Options*Fee First: Commercial - construction of on-site
units or provision of affordable off-site units
Revenue Allocation Affordable housing development
Collections Unknown
Updates
Residential fee is updated annnually - ownership
developments based on percentage change in
the 3-year trailing Freddie Mac San Francisco-
Oakland-Fremont MSA House Price Index; rental
developments based on annual percentage.
Commercial updates unknown.
*Construction First: Policies that include the option to pay; Fee First: policies with an option to build units
98
91
DRAFT - FOR DISCUSSION ONLY
aPPEndIx c: conStructIon coSt dEtaIl
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
APPENDIX C: CONSTRUCTION COST DETAIL
This section includes a series of figures that provide detail from the 2015 FIL assumptions
followed by updated cost information for 2020. Also included at the bottom of each figure is
projected revenues by category for each project followed by an estimated City subsidy per
FTE.
City of Aspen Affordable Housing Project Costs Detail [Original Estimates (“Model 2”) from October 12, 2015, City Council Meeting]
99
92
DRAFT - FOR DISCUSSION ONLY
aPPEndIx c: conStructIon coSt dEtaIl
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
City of Aspen Affordable Housing Project Costs Detail [Original Estimates (“Model 2”) from October 12, 2015, City Council Meeting, Modified to 62.5% Density by TischlerBise]
City of Aspen Affordable Housing Total Development Costs Detail (2020)
100
93
DRAFT - FOR DISCUSSION ONLY
aPPEndIx d: land acquISItIon coStS dEtaIl
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
APPENDIX D: LAND ACQUISITION COSTS DETAIL
A sample of land acquisition costs is provided, as referenced in the body of this report.
Sources are as indicated.
City Land Purchases for Affordable Housing (2008)
City acquisitions (~2008)
802 West Main 517 Park Circle 488 Castle Creek TOTAL
Land Acres 0.21 0.33 0.82 1.37
Land Sq. Ft. 9,148 14,458 35,895 59500.60
Original Cost $3,690,000 $4,105,000 $5,400,000 $13,195,000
$/Acre $17,571,429 $12,367,810 $6,553,113 $9,659,973
$/Sq. Ft. $403 $284 $150 $222
Source: City of Aspen
Other Land Purchases for Affordable Housing (2018-2019)
Acquisitions for Affordable Housing Projects (~2018-19)
404 Park 834 W. Hallam 611 W. Main 210 W. Main TOTAL
Parcel Size 15,000 6,600 9,000 6,000 36,600
Parcel Acre 0.34 0.15 0.21 0.14 0.84
Land Value $4,500,000 $1,813,000 $2,025,000 $2,350,000 $10,688,000
$/Acre $13,068,000 $11,965,800 $9,801,000 $17,061,000 $12,720,472
$/Sq. Ft. $300 $275 $225 $392 $292
Source: City of Aspen
101
94
DRAFT - FOR DISCUSSION ONLY
aPPEndIx d: land acquISItIon coStS dEtaIl
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
City of Aspen Vacant Land Sales from Pitkin County Assessor
102
95
DRAFT - FOR DISCUSSION ONLY
aPPEndIx E: dEvEloPmEnt coSt WorkShEEt
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
APPENDIX E: DEVELOPMENT COST WORKSHEET
The following worksheet was developed by TischlerBise to aid in data collection with private
and public affordable housing developers. No entity used this sheet to provide information to
the consultant team. However, it is provided here for potential future use.
103
96
DRAFT - FOR DISCUSSION ONLY
aPPEndIx E: dEvEloPmEnt coSt WorkShEEt
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
104
97
DRAFT - FOR DISCUSSION ONLY
CITY OF ASPEN, COLORADO | FEE-IN-LIEU ASSESSMENT AND RECOMMENDATIONS REPORT
End of Report.
105