The Carlsbad City Council approved increases to the City’s inclusionary housing in-lieu fees during its March 22, 2022 meeting.

The existing inclusionary ordinance was adopted in 1993 and required developers to include 15% of total units in new residential developments for low-income households.   Developments with six or less units have the option to pay an in-lieu fee to satisfy their affordable housing obligations.  The in-lieu fee was recalculated in 1996 to $4,515 per market-rate unit, and had remained unchanged since then.  In-lieu fee payments are deposited into the City’s Housing Trust Fund, also established in 1993, and used to assist in affordable housing development citywide. 

The City hired Keyser Marston Associates, Inc. to prepare an Inclusionary Housing In-lieu Fee Update Report (completed April, 2021) which analyzed the financial feasibility of changing the inclusionary requirement and/or in-lieu fees, and to provide options ensuring any possible changes would be economically sound and not deter private investment.

Additionally, KMA was asked to focus on policy options specifically for the City’s Village and Barrio Master Plan area.  KMA calculated potential fee levels Citywide and within the Village/Barrio on a square foot and per unit basis; ultimately the City Council decided to apply the same rates Citywide.

KMA considered two approaches in establishing a framework for setting possible fee levels: (1) the economic impact of incorporating affordable housing on-site; and (2) the funding level required for the market-rate developer or City to implement targeted inclusionary housing production in an off-site location.

To better provide context and better inform the Council, KMA reviewed the City’s historical production of housing units and revenues from in-lieu fees, and conducted a survey of inclusionary in-lieu fees and affordable housing impact fees in other San Diego County communities. 

Highlights of the City’s March 2022 update include:

• Single family in-lieu fees increased from $4,515 to $8,529
• 2-6 unit projects in-lieu fees increased to $15/SF from a previous fee of $4,515 per market-rate unit, adjusted annually based on CPI
• Projects with 7+ units continue to include 15% of total units for low income households or Developers may work with the City to build units off-site