2022-11-15 CC Agenda Packet - PRESENTATION - ITEM D11 - Affordable HousingC Economic & Planning Systems, Inc. 800 Wilshire Blvd., Suite 410 ■ Los Angeles, CA 90017
Tl?e Economics of Lane/ Use 213.489.3838 ■ www.epsys.com
PROJECT BACKGROUND
■ EPS was hired to help the City of El Segundo promote redevelopment
and production of new housing in the city. More specifically, EPS was
hired to:
1. Conduct an economic analysis of the existing R-3 properties (the
study area)
2. Develop an affordable housing upzoning model that includes the
replacement requirements under SB 330
3. Identify development regulations that apply to the study area that
may need to be amended to enhance redevelopment and housing
production feasibility
Economic & Plarining S%,stems EPS PPT Presentation 1 1
PROJECT BACKGROUND - SB 330
■ Also known as the "Housing
Crisis
Act of 20191"
SB 330 limits the
demolition
of
lower
-cost and
rent
-stabilized
apartments
by requiring:
— one -for -one replacement of demolished units at comparable affordability
— monetary assistance to displaced tenants for relocation
— the former tenants' right to return to the replacement units.
■ Any efforts to redevelop existing housing must account for this
replacement as a constraint on revenue from new projects
Economic & Plarining S%,stems EPS PPT Presentation 1 2
EXISTING CONDITIONS
Citywide
Population
Average Household
Size
Housing Stock Built
2010 or later
Study Area
Number of Units
# of Acres
# of Parcels
Current Density
R-3 Density Allowed
Economic & Planning Systems
16,777
2.53
1.1%
577
18
74
32 Du/Ac
27 Du/Ac
EPS PPT Presentation 1 3
STREET -LEVEL IMAGES OF THE STUDY AREA
Indiana Court
Maple Avenue
Economic & Planning Systems EPS PPT Presentation 1 4
VALUE OF EXISTING PROPERTIES
■ The existing units produce
cash flow to their owners
■ Developers buying the existing
properties will need to pay the
current owners based on the
value of the existing units
■ EPS estimates that existing
properties have value of
roughly $1 2.9M / acre
Value of Existing Units
Rent/Unit/Month
$2,200
Rent/Unit/Year
$26,400
- Operating Expenses
and Vacancy Losses at
35%
- 9 240
= Net Operating
$17,160
Income
/ Capitalization Rate
4.25%
$403,765
= Market Value/Unit
X Units/Acre (as built)
32
= Total Value/Acre
$12,920,471
Economic & Planning Systems EPS PPT Presentation 1 5
DENSITIES REQUIRED FOR FEASIBILITY DEPEND ON REPLACEMENT NEEDS
■ SB 330 requires replacement of
existing lower -income units
- If incomes of current/ recent
tenants is known, that determines
number of replacement units
- If incomes not known, use
"rebuttable presumption" based on
overall City renter incomes (-25%)
Value of Existing Units
Rent/Unit/Month
$2,200
$2,200
$2,200
$2,200
$2,200
Rent/Unit/Year
$26,400
$26,400
$26,400
$26,400
$26,400
Operating Expenses and Vacancy
Losses 9 240
9 240
9 240
9 240
9 240
=Net Operating Income
$17,160
$17,160
$17,160
$17,160
$17,160
/CapitalizationRate
4.25%
4.25%
4.25%
4.25%
4.25%
=Market Value/Unit
$403,765
$403,765
$403,765
$403,765
$403,765
x Units/Acre (as built)
32
32
32
32
32
=Total Value/Acre
$12,920,471
$12,920,471
$12,920,471
$12,920,471
$12,920,471
■ "Residual land value" (project
MarkedateRens from ewUnits
Market Rate Rent/Unit/Month
$2,925
$2,925
$2,925
$2,925
$2,925
value minus costs) must exceed
x#Market-Rate
Low Income Rent/Unit/Month
,930
$1,930
,9.3
$1,930
,930
$1,930
,9.9
$1,930
85.1
,930
$1,930
$1 2.9 M / acre base value
x#Lowlncome
Very Low Income Rent/Unit/Month
0
$1,126
4
$1,126
8
$1,126
12
$1,126
16
$1,126
x#Very Low Income
0
4
8
12
16
Weighted Avg. Rent/Unit/Year
$35,100
$33,365
$32,139
$31,228
$30,519
Operating Expenses and Vacancy Losses
12 285
11678
11678
11678
11678
■
EPS estimates feasibility WIII
=Net Operating Income
/ Return on Cost Requirement
$22,815
5.00%
$21,687
5.00%
$20,462
5.00%
$19,550
5.00%
$18,841
5.00%
require zoning of roughly / 0-
=Market Value/Unit
Development Costs/Unit(excl. Land)
$456,300
$266,475
$433,746
$266,475
$409,234
$266,475
$390,998
$266,475
$376,822
$266,475
1
1 2 O DU/acre t O meet baseline
= Residual Land Value/New Unit
x Total New Units
$189,825
68
$167,271
77
$142,759
91
$124,523
104
$110,347
117
property values
=Total Residual Land Value
$12,920,471
$12,930,017
$12,933,973
$12,937,930
$12,921,690
Total New Units Required for Feasibility
68
77
91
104
117
Sources: City of El Segundo; Costar; CBRE; EPS
Economic & Planning Systems
EPS PPT Presentation
6
EXAMPLES OF DENSITIES REQUIRED
Missouri Place
Los Angeles, CA
137 Du/Ac
Playa Vista
Waterstone
Playa Vista, CA
69 Du/Ac
Mio Apartments
Seattle, WA
205 Du/Ac
Pacific Promenade
Playa Vista, CA
99 Du/Ac
Sources: CoStar, The Urbanist
Economic & Planning Systems
EP5 PPT Presentation 1 7
EL SEG U N DO
CAN
MAKE
A VARIETY
ACHIEVE
THE
REQUIRED
DENSITIES
Lot Area 7,000 square feet (min.)
Height 32' (max)
Density 27 Du/Ac
(<= 15,000 SF lot)
Density 18 Du/Ac
(> 15,000 SF lot)
OF CHANGES TO REGULATIONS TO
Minimum/Maximum No current requirement in code.
Unit Sizes
Lot Coverage 53% of the area of the lot (max)
Parking 2 spaces per unit,
plus 1 visitor space for every 3 units
Increase minimum lot size for projects being
developed at higher density
85' (max)
120 Du/Ac (max)
Minimum or maximum unit sizes
85% of the area of the lot (max)
Reduced or alternative parking standards
responding to TDM approaches
Economic & Planning Systems FPs PPT Presentation 1 8
NEXT STEPS
■ Staff seeks City Council direction and recommended amendments to
the R-3 multi -family zone to potentially accommodate increased
density.
Economic & Plarining S%,stems EPS PPT Presentation 1 9