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Home My WebLink Aboutagenda.council.worksession.202104121 AGENDA CITY COUNCIL WORK SESSION April 12, 2021 4:00 PM, City Council Chambers 130 S Galena Street, Aspen WEBEX www.webex.com Enter Meeting Number 182 986 7677 Password provided 81611 Click "Join Meeting" OR Join by phone Call: 1-408-418-9388 Meeting number (access code): 182 986 7677# I.WORK SESSION I.A.Affordable Housing Code Amendment Update 1 MEMORANDUM TO: Mayor Torre and Aspen City Council FROM: Ben Anderson, Principal Long-Range Planner THROUGH: Phillip Supino, Community Development Director MEMO DATE: April 7, 2021 MEETING DATE: April 12, 2021 RE: Work Session Discussion – Proposed Land Use Code Amendments – GMQS and Affordable Housing Credits REQUEST OF COUNCIL: This work session’s purpose is to review proposed Land Use Code amendments related to Policy Resolution #079, Series of 2021 (Exhibit A). These amendments reflect the first phase of responses to coordination between the LUC and Council’s affordable housing goals. The proposed amendments would impact the Growth Management Quota System and Certificates of Affordable Housing Credits chapters of the LUC. Staff anticipates presenting Ordinances to Council to codify these amendments on April 27th (First Reading) and May 11th (Second Reading). Direction from Council is desired as staff finalizes the proposed amendments and related code language. See Exhibit B for a table outlining the specific questions of Council requesting direction. SUMMARY AND BACKGROUND: Following several discussions in work sessions with staff, Council passed Policy Resolution #079, Series of 2020 in October of 2020. This resolution (Exhibit A) approved pursuit of code amendments in four areas: 1) Affordable Housing Fee-in-Lieu – update calculation and methodology for updating over time. 2) Certificates of Affordable Housing Credits program – improvements to provide clarity and optimize effectiveness of the program. 3) Existing Credits and Incentives within affordable housing mitigation requirements – bring equity to mitigation requirements across development types. 4) Multi-family Replacement requirements – clarify and simplify and ensure that redevelopment scenarios continue to meet community goals and expectations. 2 Page 2 of 14 Over the last 18 months, with consultant support, staff has held discussions with representatives of the development community in evaluating and now proposing code amendments in response to the Policy Resolution and the previous discussions with Council. STAFF DISCUSSION: This memo covers individually each of the four topic areas outlined above. Each section includes staff recommendations for Council action at the upcoming ordinance hearings and questions for Council to answer to inform staff work in preparation for those hearings. Affordable Housing Fee-in-Lieu (FIL) In 2019 and 2020, staff worked with consultants Julie Herlands of TischlerBise and Tyson Smith of White and Smith in the drafting of the Fee-in-Lieu Assessment and Recommendations Report. This study evaluated aspects of Aspen’s affordable housing mitigation system and specifically the FIL for legal sufficiency and soundness related to previous calculation methodologies. The report provided recommendation for a new calculation, using adjusted methodologies. It is essential to note for Council that determining a community-specific, legally defensible fee-in-lieu rate is a highly specialized exercise rooted in national best practices and clear methodologies. Staff supported industry leading experts in this process and suggests Council accept their recommendations. In Fall of 2020, Julie and Tyson, working with staff began work towards a new calculation of the FIL. The following describes the methodology and resulting proposed update to the FIL. Desired Outcomes: • Reflective of actual costs and revenues of affordable housing in Aspen’s development context. • Simple, direct, repeatable. • Legally defensible and following best practices in determining impact fees. • Identify a total development cost – land, hard and soft construction costs – on a per square foot of net livable basis – and by FTE (full-time equivalent). • Clear process for annual and 5-year updates. Projects utilized in determining development costs: Construction Costs: Burlingame III (Phase 2B) – estimates at submission of building permit; 79 Units, 193 FTEs, City of Aspen 150 Fund 802 W. Main – completed project; 10 units, 17.5 FTEs, Public/Private 517 Park Circle – completed project; 11 units, 21.25 FTEs, Public/Private 488 Castle Creek – completed project; 24 units, 47 FTEs, Public Private 210 W. Main – completed project; 8 units, 18 FTEs, Private, AH Credits 3 Page 3 of 14 Land Costs: 834 W. Hallam – in construction; .15 acre, 7 units, 18.75 FTEs, Private, AH Credits 611 W. Main – Land Use/HP Approvals; .21 acre, 7 units, 14.75 FTEs, Private, AH Credits 802 W. Main – completed project; .21 acre, 10 units, 17.5 FTEs, Private/Public 517 Park Circle – completed project; .33 acre, 11 units, 21.25 FTEs, Public/Private 488 Castle Creek – completed project; .82 acre, 24 units, 47 FTEs, Public/Private 1020 E. Cooper – proposed project/under appeal, .10 acre, 12.75 FTE, Private, AH Credits Lumberyard – land purchase/planned development; 7.75 acres, 549 FTEs* City of Aspen 150 Fund *FTE density averaged from other projects Methodology: 1) Utilizing public sector, private sector, and public/private partnership affordable housing projects, staff and the consultant team identified actual land and construction (hard and soft) costs for recent projects and land purchases. 2) Costs for both land and construction were analyzed by project to the square foot of net livable development and averaged across the projects. Using the Code determined calculation of 400 square feet per full time equivalent (FTE) employee, a total cost of constructing affordable housing per FTE was identified. 3) Utilizing the Aspen Pitkin County Housing Authority (APCHA) Guidelines, established sales and rental rates by Category and bedroom count were used in a calculation to identify the anticipated revenue stream per FTE for completed projects. Two important assumptions were included for the rental revenue stream: a) revenue (rental income) was calculated over a 15 year period with a 2% annual increase in the rental rate; and b) rental revenue was reduced by 50% to acknowledge common maintenance and operations costs. Sales and rental revenue were then averaged per FTE, by Category. 4) The per FTE revenue amount for each Category (identified in #3 above) was subtracted from the total development cost per FTE (identified in #2 above). The remainder of each calculation subtracting the Category revenue from the total cost per FTE results in the Category Fee-in-Lieu schedule above. Total development cost per FTE – Revenue per FTE by category = Fee-in-Lieu by Category 4 Page 4 of 14 Calculation Outcomes: Note: See Exhibit B for a complete set of tables identifying costs and revenues. Cost Per Square Foot – Net Livable Per FTE Land $422.00 $168,800.00 Construction – Soft Costs $186.70 $74,681.92 Construction – Hard Costs $501.34 $200,535.03 Total $1,110 $444,017 Revenue Sales – Per FTE Rental Per FTE AVG. Per FTE Category 1 $30,130 $37,763 $33,946 Category 2 $67,519 $63,530 $65,525 Category 3 $102,839 $89,780 $96,309 Category 4 $161,810 $116,433 $139,121 Category 5 $227,872 $155,378 $191,625 Fee-in-Lieu Costs/FTE Revenues/FTE Proposed FIL Category 1 $444,017 $33,946 $410,071 Category 2 $444,017 $65,525 $378,492 Category 3 $444,017 $96,309 $347,708 Category 4 $444,017 $139,121 $304,896 Category 5 $444,017 $191,625 $252,392 Fee-in-Lieu Current FIL Adopted 2018 Proposed FIL % Increase from 2018 Category 1 $381,383 $410,071 7.5% Category 2 $342,599 $378,492 10.4% Category 3 $306,550 $347,708 11.8% Category 4 $238,687 $304,896 21.7% Category 5 $168,290 $252,392 50.0% Note: Categories 2 and 4 are highlighted as these are the primary Categories for mitigation requirements. The values for Categories 1, 3, and 5 are used primarily for the conversion between mitigation requirements or a starting point for the value of AH Credits. Analysis: 1. The fee-in-lieu (FIL) was last calculated in 2015 using Burlingame Phase 2A and estimates of future projects at 802 W. Main, 488 Castle Creek, 517 Park Circle, and Burlingame Phase 2B. A flat 7% increase across all categories was approved by Council in 2018 to arrive at the Current FIL. The 7% increase was generated by an evaluation of the construction cost index from The Engineering News Record, as described in the current Land Use Code language. 2. Following the completion of the Fee-in-Lieu Assessment and Recommendations Report, staff and the consultant team utilized actual projects costs across private, 5 Page 5 of 14 public, and public/private partnership development. Additionally, APCHA sales and rental rates were both accounted for on the revenue side of the equation. Assumptions were made related to rental revenue per FTE – but by averaging per FTE revenue between sales and rental revenue – staff is confident that this is a sound methodology that accounts for an evaluation of the revenues that would come into a project. 3. Staff and the consultant team felt strongly about the inclusion of the Lumberyard project within the calculation for land costs. While of a different scale from the other projects and has the effect of reducing the average of the land cost/FTE, it is a future project that is in the near horizon and needed to be included. To keep consistency, the average density of FTEs across the other projects was applied to the Lumberyard to arrive at the estimated number of FTEs. The resulting number was in the ballpark of the project planning that Council has been involved with. 4. The revenue side of the equation is important in that it is what differentiates between the Category FILs. Costs per FTE are fixed across Categories. It is the revenue that varies. 5. Categories 2 and 4 are the most important Categories – as these are the Categories at which mitigation most typically occurs – Category 2 for single-family and duplex residential development and Category 4 for commercial, lodging, and multi-family residential development. Staff does note the difference in the significance of the proposed increase between Cat. 2 and Cat. 4. The difference is entirely dependent on APCHA’s sales and rental rates for the Categories. 6. Land costs per FTE in the proposed methodology remain relatively flat in comparison to 2015 (keep in mind that the proposed methodology uses land that was all purchased prior to the pandemic-driven real estate market). Construction costs per FTE are up by roughly 42% since the 2015 FIL calculation (comparing BG 2A – 2015 with BG 2B – 2021). 7. The FIL is important as a foundation to the GMQS chapter of the LUC. It has implications to the success of the AH Credits program. It certainly has impacts to viability and costs associated with individual development projects. While all of these relationships were in the back of the mind as this proposed methodology was being crafted, it must be understood that at the center of this effort was one goal: to most accurately and directly understand the costs associated with the development of affordable housing. 8. Update methodology. Staff and the consultant team are recommending two concrete steps in defining future updates to the FIL calculation. First, the FIL is proposed to be updated annually using the Engineering News Record’s National Construction Cost Index. It is proposed that in the first quarter of each year, staff would propose an update using the most recent index. This would require passage of an Ordinance by Council. Secondly, it is recommended that a new calculation 6 Page 6 of 14 of development costs (land and construction) is completed every five (5) years. This full recalculation would include a consideration of any changes to APCHA sales and rental figures. Approval of the updated calculation would similarly require approval by Ordinance. Staff Recommendation: 1. Adopt the revised Fee-in-Lieu rates by Category. 2. Council will review and consider an annual increase of the FIL utilizing the Engineering News Records’ most recent National Construction Index – proposed for consideration by Ordinance in the first quarter of each year. 3. FIL will be recalculated every five (5) years utilizing the proposed methodology in evaluating actual land acquisitions and recent construction projects as possible. Questions for council: 1) Does Council generally support the approach in the proposed methodologies for calculation and regular updates to the FIL? 2) Is there any additional information that Council desires for presentation on the FIL topic during the consideration of the Ordinance for the amendment? Improvements to Certificates of Affordable Housing Credits program The Affordable Housing Credits program has been a success. Housing for roughly 110 FTEs has been completed to date – and more units are in the pipeline under construction or in land use review. These units are delivered to the community with no hard cost to the City’s 150 Fund and no soft costs to staff time and organizational capacity. In conversations with the development community, there are several concerns with the program that prevent it from providing the necessary incentives to fully compete with free- market development. Two issues are prominent. First, banks and other financing entities have difficulty recognizing the value of Aspen’s AH credits when underwriting project financing. Secondly, the value of credits is ultimately dependent on the demand for credits. Short and long-term demand from those needing to mitigate for free-market commercial and residential development, particularly at any significant quantity, is difficult to predict. There may be solutions or improvements to both of these dilemmas, but these would likely require significant changes to growth management policies, and City intervention into the credit market in ways that the program was initially designed to avoid. Given the ability of the Credits program to deliver units to the community, there is a community interest in ensuring the program works for developers seeking to use it. The proposed amendments to improve the AH Credit program do not resolve these two 7 Page 7 of 14 fundamental issues, but instead, are smaller scale improvements designed to help potential projects cross the threshold to viability. To be sure, they are incremental adjustments, but hopefully give additional encouragement to the development of AH Credits projects. Staff will continue to evaluate the feasibility of addressing the more fundamental issues. Recommended Code Changes: 1) Provide clarity that AH Credits projects can be pursued in conjunction with other state or federal incentives for affordable housing development. The code is unclear about this – and it has been interpreted in the past that an AH Credits project could not also pursue programs like the Low-Income Housing Tax Credit (LIHTC). While staff does not believe this was an intended interpretation, there has been confusion. The code change would simply provide clarity to the topic. As LIHTC and other incentive programs are often directed toward the development of units for low income individuals and families – this could have the effect of generating more lower Category units through the AH Credits program. 2) Allow for phased issuance of AH certificates to correspond with construction phasing. As proposed, this would allow 30% of approved credits to be issued at completion of foundation; 30% at framing/roofing inspection; and 40% at issuance of Certificate of Occupancy. A performance bond or other instrument guaranteeing the ability to complete the project would be a necessary condition of pursuing this option – but staff has heard that this could be an important tool to help with projects that are being self-financed – or financed outside of traditional mechanisms. Pursuit of this option would be a choice made by the developer at the time of land use review. 3) Multiplier for FTEs generated within a designated historic structure A few, recent AH Credits projects have been proposed on designated historic properties within Victorian-era structures. Combining the constraints of an existing structure that is required to be preserved with limitations on the mass and scale of new construction on site – and the additional costs of bringing an old building up to current standards, makes these projects challenging. This proposed change would grant a multiplier of 1.2 to the FTEs generated by units within the designated structure. Staff has been presented with a significant range of additional costs associated with locating AH units within a designated structure, rather than new construction. A multiplier of 1.2 seems a measure that could add additional incentive without fundamentally compromising the relationship of the AH Credits program to AH mitigation requirements. It is important to note that this multiplier would only be available to the units within a designated structure – not to units in new construction in the same project. 8 Page 8 of 14 Example: Three (3), two (2) bedroom units in a designated historic structure, deed restricted at Category 3. Current Value of Credits: 3 x 2.25 FTE = 6.75 FTE x $306,550 (Cat 3 FIL) = Approx. Value of $2,069,213 With Multiplier 6.75 x 1.2 = 8.1 FTE x $306,550 = Approx. Value of $2,480,325 The Multiplier brings roughly $400,000 of additional value to the project’s generated AH Credits for the units in the historic structure. The trade-off is that the project would “artificially” create an additional 1.35 FTEs worth of credit – that would not actually house employees. Staff believes this to have minimal and limited impact and if it has the effect of allowing a project to proceed that otherwise would not, the larger outcome justifies the trade-off. 4) Flexibility for credit issuance in deed-restricting existing free-market, multi-family residential development. One path to generate AH Credits is to improve and then deed-restrict existing free- market, multi-family residential units. If units are upgraded to meet APCHA development standards, AH Credits for this kind of project can be issued using the same calculation for FTEs based on bedrooms as new construction. Staff has encountered proposed projects where the size of the unit (small) combined with bedroom count – could not meet APCHA unit size standards. In this proposal – these types of units would rely on the 400 square feet per FTE figure in the LUC to generate the possible number of credits – rather than the bedroom count. This would provide clarity when evaluating the potential for credit issuance in existing, often older, multi-family developments. Staff Recommendation: 1) Adopt the four (4) proposed amendments to the Certificates of Affordable Housing Credits program. 2) Continue to study the feasibility of more significant changes to the credits program. Questions for Council: 1) Does Council support staff’s proposed amendments to the AH Credit program? 2) Does Council support staff continuing efforts to evaluate possible solutions to underlying, fundamental issues within the credit program? 9 Page 9 of 14 Multi-Family Replacement – Improvements and Updates Staff has been working with a consultant team from Design Workshop to do two primary things: 1) to respond to some basic confusion that property owners and the development community has when working in this section of the code that has been amended multiple times over its 30+ year history; and 2) To study the development scenarios that result from this policy/regulation – so to better understand the realities of likely development outcomes. From this effort, which is still on-going, staff intends to come forward with what will likely be a proposal for significant change to how redevelopment of existing multi-family is dealt with in the GMQS chapter of the code. We are not proposing any significant change at this time for the following reasons: 1) This is a very important, and very complex section of the code. Because of the trends in Aspen’s real estate market in the last year, it is becoming even more important and complex. Staff wants to make sure that we get any proposed changes right. 2) The analysis of the development scenarios – using a new tool that we have developed with the consultant team – is showing some things that we expected to see, but other outcomes that we did not. Staff needs to better understand the implications of this more clearly before making specific recommendations. 3) This is a topic that will require a robust conversation with the community (property owners, the development community, etc.). The gathering and communications limitations of this last year have significantly curtailed staff’s ability to conduct outreach. Staff followed Pitkin County’s excellent efforts to engage on significant proposed changes to their GMQS system. The limitations of the current context were shown to be difficult to overcome and that process has been postponed by the BOCC. Staff sees changes to multi-family replacement as being similar in nature and scope. We recommend pursuing any proposed changes on this topic when staff can provide the community with more normal engagement opportunities. While staff recommends deferring any significant changes to sometime in the second half of 2021, we are proposing minor changes to the text of multi-family replacement to clear up some misunderstandings and scrivener’s errors from previous amendments which add to the confusing nature of the section of the code. No policy or regulatory changes are proposed, only clarification and clean-up of the text. Staff would also like to present Exhibit C. This document was created by the consultant team to provide a simple illustration of how multi-family replacement actually works related to the code requirements. This will be an important tool as we have conversations about potential changes. 10 Page 10 of 14 Staff Recommendation: 1) Adopt minor changes to the multi-family replacement section of the code that clarify and clean-up, but do not change policy or regulatory outcomes at this time. 2) With the support of the consultant team – continue to study and evaluate development scenarios and potential responses. 3) Return to Council later in 2021 with proposals for substantial policy and regulatory changes in support of improved development outcomes and affordable housing goals. Questions for Council: 1) Does Council support staff’s recommendation of a clean-up and clarification of multi-family replacement in this round of amendments – and deferring more substantial policy and/or regulatory changes until more study can been completed and a more robust engagement process can be pursued. Incentives and Credits within the affordable housing mitigation system From previous discussions with Council, staff identified four (4) specific policies to study and evaluate as potential amendments. In summary, these existing credits/incentives have the effect of reducing AH mitigation requirements for different development types. 1) Lodge Unit Density and Size Incentive – this reduces the required mitigation of a lodge project if a project utilizes land efficiently and provides smaller unit sizes. The reduction is on a sliding scale that reduces required mitigation from 65% to as low as 10%. This reduction was part of the conversation related to Lift One Lodge and Gorsuch Haus as their mitigation requirements were being evaluated by Council. Both projects were fully code compliant in the required mitigation – but both took full advantage of this incentive in significantly reducing mitigation. it is important to note that in a lodge scenario this incentive applies to all related uses – commercial, residential, etc. in the same project. 2) Existing Lodge Unit Credit – Under current code, in a redevelopment scenario that would trigger demolition, the new lodge would receive a credit of units for existing against the new unit count – regardless of whether there was ever mitigation provided for the existing units. 3) Existing Residential Floor Area Credit – Under current code, a single-family or duplex, when redeveloped (triggering demolition), receives a credit for existing Floor Area towards the new Floor Area – regardless of whether there was ever mitigation provided for the existing unit(s). 4) Exemption for Residential sub-grade area – In residential (primarily single-family and duplex) development and redevelopment scenarios, the vast majority of the 11 Page 11 of 14 sub-grade area is exempt from the Floor Area calculations that determine AH mitigation requirements. While this issue also intersects with mass and scale questions in zone district dimensional limitations, this discussion can be isolated to the mitigation context. Recommended Code Changes: At this time staff is recommending the elimination of the Lodge Incentive and Credit (1 and 2, above), but is recommending deferral to later in 2021 on the Residential Credit and Exemption (3 and 4, above). Lodge Incentive and Credit – Staff recommends that these aspects of the code be removed for the following reasons: 1) The mitigation reduction incentive for density and unit size has tended not to translate into the lodge outcomes that were desired. Often projects are designed within the code language to meet the letter of the regulation, but not necessarily the intent. Even if the desired outcomes were fully realized, it seems that community and Council desires for affordable housing is now of a higher priority than the type of lodge product that is being produced. 2) In the code amendments responding to the 2016 Moratorium, Council removed the automatic credit for commercial Net Leasable in redevelopment scenarios. Instead, commercial projects need to show that this area was previously mitigated before receiving the credit. Staff recommends that lodge uses be consistent with other commercial mitigation requirements in this regard. In an important difference, staff does not recommend that mitigation for existing units be phased in over time. Instead redeveloped lodge units would be mitigated at 65%. 3) If a project could show evidence of previous mitigation for existing units, consistent with commercial development, the existing credit would be applied. Residential – Credit for Existing Floor Area and Sub-Grade Exemption 1) Staff, while supportive of the potential changes to residential mitigation is not recommending these changes at this time and instead recommends deferral to a future process This could be considered in coordination with amendments to multi- family replacement as described above, and analysis of the affordable housing mitigation requirements for other residential uses. To get a sense of the scale and impact of these possible changes from current code, staff offers the following scenario: • R-6 Zone District – 3,240 square feet of allowable Floor Area. • Existing home of 2,900 square feet of Floor Area is proposed for demolition. Existing home has no evidence of previously mitigating. 12 Page 12 of 14 • New, proposed home will build to maximum allowable Floor Area and will additionally include a 3,000 square foot basement (currently exempt). Current Mitigation Requirements: 3,240 sf (proposed FA) – 2,900 sf (existing FA) = 340 sf (new FA) 340 sf = .05 FTE = $17,130 of Cat. 2 Fee-in-Lieu Removal of Existing Floor Area Credit: 3,240 sf of FA = .52 FTE = $178,151 of Cat 2 Fee-in-Lieu Removal of Sub-Grade Exemption: 340 sf of new FA + 3,000 sf of Sub-Grade area = 3,340 of total new FA 3,340 sf = .53 FTE = $181,577 of Cat. 2 Fee-in-Lieu Removal of both Existing Floor Area Credit and Sub-Grade Exemption: 3,240 (Above Grade) + 3,000 (Sub-Grade) = 6,240 of new FA 6,240 sf = 1.01 FTE = $346,025 of Cat. 2 Fee-in-Lieu Based on previous conversations with Council, there are numerous reasons to support this policy change. First, this would bring equity in terms of mitigation across development types. Second, this would begin to capture the employee generation that is occurring in residential development and re-development scenarios that is not currently captured. Third, residential development and redevelopment are driving many of the perceptions and real impacts of “growth” that have been discussed with Council. These policy changes would be a major step toward responding to these issues. However, staff cannot recommend these changes at this time for the following reasons: • Staff has similar concerns to community engagement limitations discussed above related to multi-family replacement. These would represent major changes in how residential development is financially evaluated and designed. • The last residential generation/mitigation study was conducted with current code in place. Staff believes a robust analysis of these potential changes related to the previous residential analysis – and perhaps the need for a new study to justify these mitigation requirements would be necessary. • Staff believes that this type of change would need to be connected to clearly stated and specific goals related to affordable housing. Similarly, clear policy statements about the current impacts of residential development / redevelopment to community “growth” patterns would be needed in support of these changes. 13 Page 13 of 14 Staff Recommendation: 1) Eliminate the Lodge Unit Size and Density Incentive and Existing Lodge Unit Credit. 2) Continue to study and evaluate the justification and impacts of eliminating the existing residential floor area credit and sub-grade exemption. No related code changes are proposed at this time. 3) Continue to discuss and build policy around affordable housing and growth management goals to provide a basis for future code changes in this area. Questions for Council: 1) Does Council support the elimination of the Lodge Unit Size and Density Incentive, and Credit for Existing Units as proposed? 2) Does Council support the deferral of consideration of changes to the Credit for Existing Residential Floor Area and Sub-Grade Exemption. 3) Does Council support staff continuing to work on providing support and justification to these types of code changes? This would include pursuing the expertise of consultant / professional services and additional budget requests (Staff has included a Spring Supplemental request for funds to cover the cost of this work.). CONCLUSION: Dependent on the outcomes of this work session, staff intends to return to Council with proposed LUC amendments on the topics described above: First Reading: April 27th Second Reading: May 11th Prior to the review of the Ordinance, staff will be presenting these proposed changes to the Planning and Zoning Commission on Tuesday, 4/20; and the APCHA Board on Wednesday, 4/21. Recommendations from these boards to Council will be provided. FINANCIAL IMPACTS: At this time, N/A. ENVIRONMENTAL IMPACTS: N/A ALTERNATIVES: N/A RECOMMENDATIONS: See above and in Exhibit B. CITY MANAGER COMMENTS: 14 Page 14 of 14 EXHIBITS: EXHIBIT A – Policy Resolution No. 079, Series of 2020 EXHIBIT B – Summary Table of Staff Recommendations and Questions for Council EXHIBIT C – Full Tables for Fee-in-Lieu Calculation EXHIBIT D – Summary of Current Multi-Family Replacement Requirements 15 RESOLUTION NO. 079 SERIES OF 2020 A RESOLUTION OF THE CITY OF ASPEN CITY COUNCIL ADOPTING POLICIES AUTHORIZING AMENDMENTS TO THE LAND USE CODE IN SUPPORT OF CITY COUNCIL'S AFFORDABLE HOUSING GOALS WHEREAS,pursuant to Section 26.310.020(A),a Policy Resolution is required to initiate the process of amending the City of Aspen Land Use Code; and, WHEREAS,pursuant to Section 26.310.020(A), during a work session on August 10, 2020, the Community Development Department received direction from City Council to explore targeted amendments to the Land Use Code related to growth management, affordable housing mitigation and the Affordable Housing Credits Program; and, WHEREAS, the Community Development Director recommends Council consider potential changes to the General Provisions (26.104), Growth Management Quota System 26.470), Certificates of Affordable Housing Credits (26.540) sections, and other sections of the Land Use Code as necessary for coordination, WHEREAS, City Council has reviewed the proposed code amendment policy direction, and finds it meets the criteria outlined in Section 26.310.040;and, WHEREAS, amending the Land Use Code as described below will ensure the ongoing effectiveness and viability of the regulations within the City of Aspen Land Use Code to achieve City Council's policy and regulatory goals related to affordable housing; and, WHEREAS,the regulations and standards in the Land Use Code provide important tools in the development of affordable housing within the City of Aspen; and, WHEREAS,Aspen's affordable housing system is essential in the advancement of a sustainable community; and, WHEREAS,the proposed Land Use Code amendments related to affordable housing will advance specific policy statements in the Aspen Area Community Plan(AACP); and, WHEREAS, pursuant to Section 26.310.020(B)(2), during a duly noticed public hearing on October 13, 2020 the City Council approved Resolution 079-2020, by a 5 to 0 vote,requesting code amendments to the Land Use Code; and, WHEREAS,pursuant to Section 26.310.020(B)(1), the Community Development Department, following approval of this Policy Resolution will conduct Public Outreach with the public, property owners, and members of the development community; and, Resolution 079-2020 Land Use Code/Affordable Housing Code Amendments Policy Resolution Pagel of 3 Exhibit A - Policy Resolution 16 WHEREAS, this Resolution does not amend the Land Use Code, but provides direction to staff for amending the Land Use Code;and, WHEREAS,the City Council finds that this Resolution furthers and is necessary for the promotion of public health, safety,and welfare. NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ASPEN AS FOLLOWS: Section 1: Overall Code Amendment Objectives The objectives of these code amendments are to: 1. To more closely align City Council's affordable housing goals with policies and regulations in the Land Use Code. 2. Build upon the established successes of Aspen's affordable housing efforts. 3. Update, improve, clarify and simplify existing policies and regulations related to the provision of affordable housing. 4. Improve policies to further encourage both public and private sector development of affordable housing. 5. Maintain existing and increase the free-market and deed-restricted housing units available to Aspen's workforce. Section 2: Tonics for Potential Code Amendments 1. Affordable Housing Fee-in-Lieu 2. Certificates of Affordable Housing Credits 3. Existing Development Credits and Incentives Related to Affordable Housing Mitigation for various development and use types. 4. Multi-family Replacement Section 3: Affordable Housing Fee-in-fieu Amendment The goals of this amendment are to: 1. Update the calculation method and propose updated figures to better reflect the value of an affordable housing unit in the context of Aspen's development realities. 2. Update the current fee-in-lieu rate and provide clarity to the method of updating the fee-in-lieu calculation over time. Section 4: Certificates of Affordable Housing Credits Code Amendment The goals of this amendment are to: 1. Align the Land Use Code and APCHA development requirements to improve clarity and provide flexibility to affordable housing development and re-development projects. 2. Modify regulations and processes which govern the value, management, and accounting of Certificates of AH to ensure the program aligns with AH market dynamics and optimizes the effectiveness of the Certificates program. Resolution 079-2020 Land Use Code/Affordable Housing Code Amendments Policy Resolution Page 2 of 3 17 3. Provide clarity in the relationship between Aspen's Credit program and other affordable housing incentives and the eligibility of various entities to generate Certificates. Section 5: Existins Development Credits and Incentives Amendment The goal of this amendment is to: 1. Bring equity to affordable housing mitigation requirements across different development types. Section 6: Multi-family Replacement Amendment The goals of this amendment are to: 1. Bring clarity to and simplify policies that preserve existing free-market and deed restricted multi-family housing units. 2. Ensure that redevelopment scenarios of existing multi-family housing continue to meet community goals and expectations. Section 7: Other Amendments as Necessary Other amendments may be required to ensure coordination between the sections identified above and other sections in the LUC which may not have been anticipated. Section 8• This resolution shall not affect any existing litigation and shall not operate as an abatement of any action or proceeding now pending under or by virtue of the resolutions or ordinances repealed or amended as herein provided,and the same shall be conducted and concluded under such prior resolutions or ordinances. Section 9• If any section, subsection, sentence, clause, phrase, or portion of this resolution is for any reason held invalid or unconstitutional in a court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision and shall not affect the validity of the remaining portions thereof. FINALLY,adopted this 13th day of October,2020. Torre, Mayor TEST: APPROVED AS TO FORM: Nicole Henning,City Cle es True,C Aomey Resolution 079-2020 Land Use Code/Affordable Housing Code Amendments Policy Resolution Page 3 of 3 18 EXHIBIT B – Summary Table - Staff Recommendation and Questions for Council Policy Topic Staff Recommendation Questions for Council Fee-in-Lieu 1. Adopt the proposed Fee-in-Lieu schedule. 2. Council will review and consider an annual increase of the FIL utilizing the Engineering News Records’ most recent National Construction Index – proposed for consideration by Ordinance in the first quarter of each year. 3. FIL will be recalculated every five (5) years utilizing the proposed methodology in evaluating actual land acquisitions and recent construction projects as possible. 1) Does Council generally support the approach in the proposed methodologies for calculation and regular updates to the FIL? 2) Is there any additional information that Council desires for presentation during the consideration of the Ordinance for the amendment? AH Credits Program 1) Adopt the four (4) proposed amendments to the Certificates of Affordable Housing Credits program. 2) Continue to study the feasibility of more significant changes to the credits program. 1) Does Council support staff’s proposed amendments to the AH Credit program? 2) Does Council support staff continuing efforts to evaluate possible solutions to underlying, fundamental issues within the credit program? Multi-Family Replacement 1) Adopt minor changes to the multi-family replacement section of the code that clarify and clean-up, but do not change policy or regulatory outcomes at this time. 2) With the support of the consultant team – continue to study and evaluate development scenarios and potential responses. 3) Return to Council later in 2021 with proposals for substantial policy and regulatory changes in support of improved development outcomes and affordable housing goals. 1) Does Council support staff’s recommendation of a clean-up and clarification of multi-family replacement in this round of amendments – and deferring more substantial policy and/or regulatory changes until more study can been completed and a more robust engagement process can be pursued. Existing Incentives and Credits 1) Eliminate the Lodge Unit Size and Density Incentive and Existing Lodge Unit Credit. 2) Continue to study and evaluate the justification and impacts of eliminating the existing residential floor area credit and sub-grade exemption. No related code changes are proposed at this time. 3) Continue to discuss and build policy around affordable housing and growth management goals to provide a basis for future code changes in this area. 1) Does Council support the elimination of the Lodge Unit Size and Density Incentive, and Credit for Existing Units as proposed? 2) Does Council support the deferral of consideration of changes to the Credit for Existing Residential Floor Area and Sub- Grade Exemption? 3) Does Council support staff continuing to work on providing support and justification to these types of code changes? This would include pursuing the expertise of consultant / professional services and additional budget requests. 19 Page 1 of 3 EXHIBIT C – Fee-in-Lieu Tables Construction Costs Land Costs Total Costs Note: at this point in the calculation, the $/SF of net livable were multiplied by 400 SF to get at the cost per FTE. Project Soft Costs Hard Costs Total Construction Costs $/SF Net Livable $/FTE $/SF Net Livable $/FTE $/SF Net Livable $/FTE 1 $119 $51,571 $616 $268,614 $735 $320,396 2 $247 $95,794 $506 $196,630 $753 $292,424 3 $224 $83,753 $436 $163,099 $660 $246,852 4 $211 $77,582 $474 $174,559 $685 $252,140 5 $134 $53,443 $474 $189,786 $608 $243,230 Range $119 - $247 $51K - $95K $436 - $616 $163K - $268K $608 - $753 $243K - $320K Average $187 $72,471 $501 $198,538 $688 $271,008 Project $/SF Net Livable $/FTE 1 $540 $210,431 2 $481 $166,667 3 $426 $216,949 4 $544 $211,429 5 $518 $193,955 6 $311 $114,296 7 $135 $53,270 Range $135 - $540 $53K - $217K Average $422 $166,714 Inputs $/SF net livable $/FTE Land Cost $422.00 $168,800.00 Soft Costs $186.70 $74,681.92 Hard Costs $501.34 $200,535.03 Total Cost $1110.04 $444.016.95 20 Page 2 of 3 Revenues Fee-in-Lieu Fee-in-Lieu Costs/FTE Revenues/FTE Proposed FIL Category 1 $444,017 $33,946 $410,071 Category 2 $444,017 $65,525 $378,492 Category 3 $444,017 $96,309 $347,708 Category 4 $444,017 $139,121 $304,896 Category 5 $444,017 $191,625 $252,392 FOR SALE UNITS MAX NET SALES REVENUES BY CATEGORY AND SIZE OF UNIT (2020 APCHA Regulations) Category 1 Category 2 Category 3 Category 4 Category 5 Sales Price*Per SF Per FTE Sales Price*Per SF Per FTE Sales Price*Per SF Per FTE Sales Price*Per SF Per FTE Sales Price*Per SF Per FTE Studio/0 Bedroom 1.25 500 $43,120 $86 $34,496 $98,000 $196 $78,400 $164,640 $329 $131,712 $272,440 $545 $217,952 $386,120 $772 $308,896 1 Bedroom 1.75 700 $54,880 $78 $31,360 $118,580 $169 $67,760 $179,340 $256 $102,480 $291,060 $416 $166,320 $418,460 $598 $239,120 2 Bedroom 2.25 900 $65,660 $73 $29,182 $145,040 $161 $64,462 $212,660 $236 $94,516 $323,400 $359 $143,733 $454,720 $505 $202,098 3 Bedroom 3.00 1,200 $76,440 $64 $25,480 $178,360 $149 $59,453 $247,940 $207 $82,647 $357,700 $298 $119,233 $484,120 $403 $161,373 AVERAGES $60,025 $75 $30,130 $134,995 $169 $67,519 $201,145 $257 $102,839 $311,150 $405 $161,810 $435,855 $570 $227,872 * Sale price reduced by 2% to account for APCHA Commission FOR RENT UNITS MAX GROSS RENTAL REVENUE BY CATEGORY AND SIZE OF UNIT (2020 APCHA Regulations) Category 1 Category 2 Category 3 Category 4 Category 5 Rental Income Per SF Per FTE Rental Income Per SF Per FTE Rental IncomePer SF Per FTE Rental IncomPer SF Per FTE Rental Income Per SF Per FTE Studio 1.25 500 $110,725 $221 $197,469 $395 $295,057 $590 $391,602 $783 $536,942 $1,074 1 Bedroom 1.75 700 $137,207 $196 $231,875 $331 $328,629 $469 $429,553 $614 $574,267 $820 2 Bedroom 2.25 900 $162,646 $181 $266,490 $296 $363,244 $404 $464,376 $516 $608,881 $677 3 Bedroom 3.00 1200 $188,503 $157 $297,977 $248 $398,901 $332 $498,991 $416 $644,121 $537 FOR RENT UNITS: Net Revenue Available NET REVENUE AFTER EXPENSES 50.00%MAX NET RENTAL REVENUE BY CATEGORY AND SIZE OF UNIT AFTER O&M EXPENSES (2020 APCHA Regulations) Category 1 Category 2 Category 3 Category 4 Category 5 Rental Income Per SF Per FTE Rental Income Per SF Per FTE Rental IncomePer SF Per FTE Rental IncomPer SF Per FTE Rental Income Per SF Per FTE Studio 1.25 500 $55,362 $111 $44,290 $98,735 $197 $78,988 $147,529 $295 $118,023 $195,801 $392 $156,641 $268,471 $537 $214,777 1 Bedroom 1.75 700 $68,603 $98 $39,202 $115,938 $166 $66,250 $164,315 $235 $93,894 $214,777 $307 $122,730 $287,133 $410 $164,076 2 Bedroom 2.25 900 $81,323 $90 $36,144 $133,245 $148 $59,220 $181,622 $202 $80,721 $232,188 $258 $103,195 $304,441 $338 $135,307 3 Bedroom 3.00 1200 $94,251 $79 $31,417 $148,988 $124 $49,663 $199,450 $166 $66,483 $249,495 $208 $83,165 $322,061 $268 $107,354 AVERAGES $74,885 $94 $37,763 $124,226 $159 $63,530 $173,229 $224 $89,780 $223,065 $291 $116,433 $295,526 $388 $155,378 AVERAGE REVENUES FOR SALE AND FOR RENT Category 1 Category 2 Category 3 Category 4 Category 5 Rev. per Unit Per SF Per FTE Rev. per Unit Per SF Per FTE Rev. per Unit Per SF Per FTE Rev. per Uni Per SF Per FTE Rev. per Unit Per SF Per FTE Studio $39,393 $78,694 $124,867 $187,296 $261,836 1 Bedroom $35,281 $67,005 $98,187 $144,525 $201,598 2 Bedroom $32,663 $61,841 $87,618 $123,464 $168,702 3 Bedroom $28,449 $54,558 $74,565 $101,199 $134,363 AVERAGES $67,455 $85 $33,946 $129,611 $164 $65,525 $187,187 $241 $96,309 $267,108 $348 $139,121 $365,691 $479 $191,625 FTEs per Unit Sq. Ft. per Unit FTEs per Unit Sq. Ft. per Unit FTEs per Unit Sq. Ft. per Unit 21 Page 3 of 3 Fee-in-Lieu Current FIL Adopted 2018 Proposed FIL % Increase from 2018 Category 1 $381,383 $410,071 7.5% Category 2 $342,599 $378,492 10.4% Category 3 $306,550 $347,708 11.8% Category 4 $238,687 $304,896 21.7% Category 5 $168,290 $252,392 50.0% 22 The City of Aspen has a long-standing Aordable Housing Program, and requires all new development or expansions to contribute to the aordable housing system to o-set the impacts created by development. This ﬂyer details one tool for preserving and expanding the supply of aordable housing—the Multi-Family Replacement Program. Please reach out to the Planner of the Day with any questions, or for assistance in determining the options that may be best for your project. planneroheday@gmail.com 970-429-2763 ASPENMULTIFAMILY REPLACEMENTPROGRAM PRESERVINGAFFORDABLEANDACCESSIBLEHOUSINGFOR ALLOFASPEN’SRESIDENTS WHATISTHEPURPOSEOFTHEPROGRAM? ORIGIN The City's neighborhoods have traditionally comprised a mix of housing types, including those aordable by its working residents. However, because of Aspen's attractiveness as a resort environment and because of the City’s physical constraints, there is constant pressure for the redevelopment of dwellings currently providing resident housing for tourist and second-home use. Such redevelopment results in the displacement of individuals and families who are an integral part of the Aspen work force. Given the extremely high cost of and demand for market-rate housing, resident housing opportunities for displaced working residents, which are now minimal, will continue to decrease. Aspen has had a Multi-family Replacement Program in place since 1988. APPLICABILITY Any time an existing multi-family unit is demolished, combined, or converted to another use, the developer is required to comply with this code section. WHATISTHEMULTIFAMILYREPLACEMENTPROGRAM? Updated as of March 2021. As a result of the replacement of resident housing with second homes and tourist accommodations and the steady increase in the size of the workforce required to assure the continued viability of Aspen area businesses and the City's tourist-based economy, the City has found it necessary, in concert with other regulations, to adopt limitations on the combining, demolition or conversion of existing multi-family housing in order to minimize the displacement of working residents, to ensure that the private sector maintains its role in the provision of resident housing and to prevent a housing shortfall from occurring. The Multi-family Replacement Program is an Aspen City ordinance located in the Growth Manage- ment Quota System (GMQS) chapter of the City’s Land Use Code that sets in place requirements for replacing any multi-family housing units within Aspen that are demolished. INTENT The program is intended to prevent the loss of existing housing stock and increase the supply of aordable housing in Aspen. EXEMPTIONS There are a number of exemptions to these requirements. The remodeling or expansion of existing multi-family residential units is exempt from the requirements of GMQS if no additional ﬂoor area is added and no demolition of the unit occurs. Within the multi-family replacement section, the following activities are exempt from the requirements: Replacement aer non-willful demolition Demolition by public agency Demolition of units that have never housed a local working resident Demolition of illegal Bandit Units Penetration of demising walls related to normal maintenance. Demolition work related to life safety that could not have been originally anticipated. Exhibit D - Summary of existing code 23 APCHA HOUSING 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 TARGET HOUSEHOLD INCOME LEVEL AMI PERCENTAGE RANGE Aspen Multi-Family Replacement Program KEYDEFINITIONS Free Market: Dwelling units intended exclusively for residential purposes, not subject to any residency requirements and not including hotels, or lodging. Aordable Housing: Dwelling units intended to house only local working residents that are deed restricted according to the Aspen/Pitkin County Housing Authority Guidelines. APCHAHOUSEHOLDINCOMECATEGORIES RESIDENTIALUSES The Resident Occupied (RO) category oers qualiﬁed higher income households the opportunity to own aordable housing. For RO ownership qualiﬁcation, Maximum Household Gross Income Levels are unlimited, and the Maximum Household Net Assets Level is higher than other APCHA categories, or unlimited as stated in the applicable deed restriction. RESIDENTOCCUPIEDUNIT The City has created incentives for private developers to create new housing product that is not tied to a mitigation requirement (Sec 26.540). This is done by providing a saleable certiﬁcate equal to the amount of full-time equivalents (FTEs) housed by aordable housing units they create. The aordable housing developer sells that certiﬁcate to another developer who needs to mitigate for the FTEs generated by their project. CERTIFICATESOFAFFORDABLEHOUSINGCREDITS A contract entered into by the APCHA , City of Aspen, and/or Pitkin County and the developer, owner or purchaser of real property identifying the conditions of occupancy and resale as aordable housing. DEEDRESTRICTION To raze, disassemble, tear down or destroy forty percent (40%) or more of an existing structure (prior to commencing development). Demolition also includes the removal of a dwelling unit in a multi-family or mixed-use building, its conversion to nonresidential use, or any action which penetrates demising walls or ﬂoors between Multi-Family Housing Units if such action is undertaken to combine the units. DEMOLITION Any replacement units required to be deed-restricted as aordable housing shall be issued a certiﬁcate of occupancy, according to the Building Department, and be available for occupancy at the same time as, or prior to, any redeveloped free-market units, regardless of whether the replacement units are built on site or o site. TIMINGREQUIREMENT Category units refer to speciﬁc household income and AMI levels to provide lower and middle income households the opportunity to rent or own aordable housing. CATEGORYUNITS UNIT TYPE Studio 1.25 Employees One-bedroom 1.75 Employees Two-bedroom 2.25 Employees Three-bedroom or larger 3.0 Employees, plus .5 / each addl. bedroom Dormitory 1.0 Employee per 150 SF of net livable area EMPLOYEES HOUSED FULLTIMEEQUIVALENTSHOUSED A unit of measurement standardizing the workloads of employees. In this Chapter, full-time equivalents (FTEs) refer to the number of employees generated or housed by development. FULLTIMEEQUIVALENTS Whenever a project provides residential units on or o site, this schedule shall be used to determine the number of employees housed by such units: When an aordable housing mitigation requirement needs to be converted between FTEs and square feet, a conversion rate of 400 square feet (SF) per 1 FTE is used. SF/EMPLOYEECONVERSION 24 Aspen Multi-Family Replacement Program HOWDOESTHEPROGRAMWORK? EXAMPLES REPLACEMENTWITH RESIDENTOCCUPIEDOR LOWERDEEDRESTRICTION REPLACEMENTWITH CATEGORYORLOWER DEEDRESTRICTION REPLACEMENTWITH AFFORDABLEHOUSING CREDITS Aspen’s Multi-Family Replacement Program oers four paths for replacing existing multi-family units that are demolished. Dierent paths are available to dierent redevelopment eorts depending on the existing status of the units that will be demolished. Below is a summary of the requirements and allowances oered in each of the four paths. Regardless of the replacement option selected, all development must meet all applicable requirements of the code, including zoning. When this option is selected, the development can also replace 100% of the existing units as free market without additional mitigation, resulting in a doubling of the density related to the development. Additional Free Market units beyond the original number may be added subject to an additional GMQS Review requiring 60% - 70% aordable housing. A developer would select this option to provide replacement units at the Resident Occupied (RO) category, while maintaining the existing Free Market (FM) density. Six existing Free Market (FM) units are demolished and replaced with six Resident Occupied (RO) deed restricted units. demolished units replaced units When this option is selected, the development can also replace 100% of the existing units as Free Market without additional mitigation, resulting in a 50% increase in density. Additional Free Market units beyond the original number may be added subject to an additional GMQS Review requiring 60% - 70% aordable housing. A developer would select this option to provide replacement units at a Category 4 level, while maintaining the existing Free Market density. This option requires that any additional development on-site also be deed restricted as aordable housing. All the units that are replaced or built new are eligible for a Certiﬁcate of Aordable Housing Credit, and any unused Free Market development rights are required to be vacated. This section only requires that the number of units be replaced and is silent regarding bedrooms and net livable area. A developer would select this option in order to develop aordable housing credits that can be sold to other developers, or used for other projects in their portfolio. For existing Free Market residential units, there can be no net decrease in the number of overall units between the existing and proposed developments, and one of the following three options must be met: THREEPATHSFORREPLACINGEXISTINGFREEMARKETUNITS FM FM FM FM FM FM RO RO RO RO RO RO additional units FM FM FM FM FM FM additional units FM FM FM FM FM FM Six existing Free Market (FM) units are demolished and replaced with three Category 4 deed restricted units. demolished units replaced units FM FM FM FM FM FM C4 C4 C4 Six existing Free Market (FM) units are demolished and replaced with six (or more) aordable housing (AH) deed restricted units. demolished units replaced units additional units Certiﬁcates of aordable housing credit equal to the number of FTE housed by new aordable housing. FM FM FM FM FM FM AH AH AH AH AH AH AH AH AH 25 Aspen Multi-Family Replacement Program For additional information, visit Chapter 26.470 of the City of Aspen Municipal Code For existing aordable housing units, the replacement project must provide housing for the same number of employees (based on FTEs) housed by the existing units. The code allows a change in the number of units, bedrooms, and net livable area provided. There is no speciﬁc requirement related to the category of the replacement units. ONEPATHFORREPLACINGEXISTINGAFFORDABLEHOUSINGUNITS EXAMPLE Six existing aordable housing units housing twelve full-time employees (FTE) demolished and replaced with eight aordable housing units housing twelve FTEs. demolished aordable housing units replaced units REPLACEMENTOFHOUSINGFORTHESAMENUMBEROFEMPLOYEES HOUSEDINDEMOLISHEDUNITS planneroheday@gmail.com 970-429-2763QUESTIONS? PLEASECONTACTUS WHERECANREPLACEMENTUNITSBELOCATED? In terms of the location for replacement units, the code includes a preference for on-site units. Units are required to be developed on the same site on which the demolition occurred unless the owner is able to demonstrate to the Planning and Zoning Commission that “replacement of the units on site would be in conﬂict with the parcel’s zoning or would be an LINKAGESTOOTHERSECTIONSOFGROWTHMANAGEMENT Both the 50% and 100% replacement options for Free Market multi-family residential units provide the option to develop additional Free Market housing through the 60% and 70% aordable development processes (See Sections inappropriate solution due to the site’s physical constraints.” If the Planning and Zoning Commission agrees that the replacement units cannot reasonably be located on-site, the developer can replace the units o-site or through the extinguishment of a Certiﬁcate of Aordable Housing Credit. 26.470.100(H-I). These provisions allow additional Free Market units if aordable housing units are also provided. These requirements are as follows: AFFORDABLE AFFORDABLE 60% of the additional units and 30% of the net ﬂoor area are required to be aordable housing at a Category 4 or lower. If ten new units are proposed, six can be Free Market (FM) and four additional Category 4 (C4) units are required. 70% of the additional units and bedrooms are required to be aordable housing. 40% of those housing units must be at a Category 4 or lower. new units FM FM FM FM FM FM C4 C4 C4 C4 EXAMPLES If ten new units are proposed, three can be Free Market (FM) units, while four are required to be Category 4 units (or lower) and three are required to be Resident Occupied (RO) units. new units C4 C4 C4 C4 RO RO RO FM FM FM 26