We recommend the Council adopt a <strong>15% affordable set-aside</strong> on residential projects of 20+ units, with an in-lieu fee option for smaller infill. The 15% tier is the only option modeled to add meaningful affordable supply <strong>without suppressing market-rate starts</strong>: it yields an estimated 340 affordable units over five years while keeping projected production within 4% of baseline. The 10% tier under-delivers; the 20% tier triggers feasibility gaps that stall projects entirely.
Harbor Crest has added market-rate housing steadily since 2021 but produced fewer than 90 deed-restricted affordable units in that window. The current voluntary density bonus is under-used. An inclusionary requirement would make affordability a condition of entitlement rather than an incentive — but set too high, it functions as a tax that simply stops projects from penciling. The Council asked this office to model three tiers and recommend one.
Minimal feasibility impact; nearly every project still pencils.
Under-delivers — ~210 units over 5 yrs; falls short of the housing-element target.
Best balance — ~340 affordable units with production within 4% of baseline.
Needs an in-lieu option for small infill to avoid stalling sub-20-unit sites.
Highest per-project affordability where projects proceed.
Feasibility gaps on ~40% of modeled sites; net production falls — fewer total units.
Modeling basis: pro forma feasibility analysis of 28 representative parcels at current land and construction costs; affordable-unit yield projected over a five-year entitlement horizon. Full methodology in Appendix B.
The 10% tier is administratively easy but does not move the affordability needle enough to justify a new mandate. The 20% tier is counterproductive: by pushing roughly two in five modeled sites below feasibility, it reduces total starts — and therefore total affordable units — relative to the 15% case. The 15% tier paired with an in-lieu fee for projects under 20 units captures affordable supply from the projects most able to absorb it while protecting small-site production. We recommend adoption of Option B with a sunset review at 36 months.