Quality of Life Committee Wed, Jan 21, 2026 · Quality of Life Committee https://santafeminutes.space/meeting/980 == Executive Summary == The City Council meeting focused heavily on the effectiveness of Santa Fe's affordable housing policies, particularly the 'Homes Program' and its inclusionary zoning requirements. A consultant, Rick Jacobus, presented on the trade-offs between requiring developers to build affordable units on-site versus paying 'in-lieu fees' to the city. He emphasized that while on-site units promote integration, fees can often lead to more deeply affordable housing when strategically invested, and that the city needs to conduct a new economic feasibility study to update its outdated policies. Beyond affordable housing, the council approved amendments to the City Manager Qualifications Bill and received updates on various economic development initiatives, including the 'Go Local, Go Different' campaign, and senior community services. The overall sentiment was that current housing policies are no longer effective due to rising construction costs and market changes, necessitating a comprehensive review and potential overhaul. == Key Decisions == - Approved the meeting agenda unanimously (4-0). - Approved the consent agenda as amended, pulling Item H, unanimously (4-0). - Approved an amendment to the City Manager Qualifications Bill unanimously (4-0). - Approved the main motion for the City Manager Qualifications Bill as amended unanimously (4-0). == Motions & Votes == - Approval of the Agenda — Passed unanimously (Councilors Faggali, Barrett, Cassett, Chair Castro voted yes). - Approval of the Consent Agenda (as amended, Item H pulled) — Passed unanimously (Councilors Faggali, Barrett, Cassett, Chair Castro voted yes). - Amendment to the City Manager Qualifications Bill — Passed unanimously (4-0). - Main Motion (City Manager Qualifications Bill as Amended) — Passed unanimously (4-0). == Public Comment == Councilor Cassett introduced Rick Jacobus, highlighting his expertise and the need to update Santa Fe's Homes program. Rick Jacobus offered to share his slides directly. During the discussion on affordable housing, Mr. Jacobus, as an expert, cautioned against outdated policies, citing California's experience, and emphasized the need for a new study. Councilor Chavez called for a work session to ensure a shared understanding among council members. == Topics == - Inclusionary Housing Policy - City Manager Qualifications - Economic Development Initiatives - Consent Agenda Approval - Senior Services Updates - Meeting Procedures - Affordable Housing Research - Seattle Inclusionary Program - Quality of Life Committee - Business Book Club == Full Transcript == And you're live. Thank you, Mike. And if everyone is ready, I would like to call this meeting of the Quality of Life meeting to order. Could we please have a roll call, Elizabeth? Yes, ma'am. Councilor Faggali? Here. Councilor Barrett? Here. Councilor Chavis? Excused. Councilor Cassett? Also excused. Chair Castro, you have a quorum, Madam Chair. Wonderful. So, next we have the approval of the agenda. I know we have a couple of changes, but we will take that off the consent agenda. So, I would need a motion. I move to take item H off of the consent agenda. I think we need to approve the agenda first. Approve it first. And then we approve the consent. This is the regular agenda, Councilor. Okay. I approve the move to approve the agenda. Second. Wonderful. If I could, we don't have anyone online, so we can take a voice vote. So anyone in favor say aye. Aye. Opposed? Nay. Oh, and Councilor Cassett has joined us. Let's make sure that I see her hand up. Let's make sure we promote her to a panelist and then we will take a roll call vote. Make sure we understand that we have a motion on the floor to approve the agenda. Okay. Elizabeth, may we have a roll call vote, please? Yes, ma'am. Councilor Faggali? Yes. Councilor Barrett? Yes. Councilor Cassett? I'm sorry. Did we approve the agenda? What's going on? Sorry, we're just approving the agenda. We are on number three. Okay. Then yes. And there were no changes. Councilor Cassett? Chair Castro? Yes. Motion passes. I apologize, Councilor Cassett. We did start about two minutes early. You are not by any means running late. Thank you so much for being here. I hope that you're feeling a little bit better. We're going to move on to approval of the consent agenda. We did have one item pulled. Is there any other items that we would like to pull? No other items. However, I believe that there's an amendment being introduced for item eight. Yes. Okay. So, item H was, Madam Chair, is item H. Is that correct? That is correct. Item H. So we, I would need a motion for the consent agenda as amended. Motion to approve consent agenda as amended. Thank you. Wonderful. If I could get a roll call. Elizabeth. Yes, ma'am. Councilor Faggali? Yes. Councilor Barrett? Yes. Councilor Cassett? Yes. Chair Castro? Yes. Motion passes. Wonderful. So, we're moving on to presentations. We have a very exciting presentation. There is a slide deck associated with this, which everyone should have gotten through email, and that will be uploaded onto our portal as well shortly. I think we have a presenter. If we could promote them, please. Wonderful. And Councilor Cassett, I don't know if you have a few words to introduce our presenter. Sure. Sure. I'm more than happy to introduce. Hi, Rick. Thank you so much for being here. This is Rick Jacobus. I had the wonderful opportunity to meet with Rick and to hear him speak as part of the Livability Series a couple years ago. And he has done some really incredible work in the field of inclusionary zoning and fee-in-lieu, and a lot of the conversation about what are the things to look for when we're looking at this policy. So, knowing that this is a hot topic, something that everybody is very interested in, and that we've all really recognized that our Santa Fe Homes program absolutely needs a facelift, I invited Rick to come and speak and teach us a little bit about what some of the work he's looked at and answer some of our questions regarding Santa Fe. So, thank you so much again for zooming in tonight, Rick. Sure. Thanks for having me so much. Would it be better if I shared my slides directly? It seems like there's something. Yes, Rick. Thank you. That would be great. Yeah, let me do that. I think it looks like I can. Oh, someone else. You have to stop sharing first. Tell me if you can see that. Is that working? That works perfectly. Thank you. Great. Well, thank you for having me. I am Rick Jacobus, and I'm a consultant. I'm based in Oakland, California, and I work with cities and sometimes philanthropy on housing policy and affordable housing issues. And I've done a lot of work over the years on inclusionary housing programs in big cities and in small towns. And I wrote a book a few years ago about inclusionary housing, which was a really great opportunity to sort of think big picture about what's the range of practices, what are people doing, where is it working, where is it not working, what are some of the problems that we run into. And one of the big issues that comes up over and over again is this question about in-lieu fees. Everyone's always asking about how do we think about, should we allow fees or not, and how do we set the fee? And so I have some slides I'm going to share that are focused on that question because the council member Cassett said that might be a helpful topic in Santa Fe. I know a little bit about what's going on in Santa Fe. I've been working with Homewise over the years on some things. I came to town and did a talk for them, and so I have some context, but every city is so different. And so I'm going to give you some examples from other places, and my intention is not to suggest that Santa Fe is like those places, but to give you a sense of how people thought about these questions in other places so you can think about what makes sense at Santa Fe. I don't know the right answer for Santa Fe. I'm just trying to give you some framework to think about the questions. And so I'll just do a few slides and then I'll stop, and we can, you can ask me questions if there's, or just have discussion. So, as I said, I'm going to focus on this question about fees versus units, and the, a very high level, you know, tradeoffs. There's tradeoffs. There's not a best practice. There's a, you get certain things one way and other things another way. And the main tradeoff is with the units. When we, when we require developers to build affordable units in their project, we get economic integration. We get affordable units in every building, in every neighborhood. You know, when new housing is getting built, we get affordable units where that's happening. The benefits of integration are a little bit overstated. And so we, I want to, I'm going to come back and talk a little bit about some limitations on that. But that's, that's the, the reason why I think most communities have focused a lot on this question. But on the flip side, we have this efficiency argument. So when we take money in the form of fees, we have money, and we can use that money, and we can leverage other money, particularly federal and sometimes state funding for affordable housing. If a developer pays us a fee, the city can use that fee to get something built elsewhere, and that can sometimes be more efficient. Then the flip side of that is it's not always automatically more efficient. Some cities have had a really hard time spending that money, and it actually would have been much better if they had not taken the money in the first place. So I'm just want to walk through that in a little more detail and show some of the economics. And the, but the first thing I want to do is focus on why do we care about economic integration? And we, you know, we, we have had a couple decades now of solid research that sort of all points in the same direction, which is that when we're dealing with poverty and the challenges that families face in when their incomes are low, location really matters. And this study I have up here is just that they found that differences in the poverty rate in your neighborhood, where you are when you grow up, make a bigger difference than your parents' income on your future economic life, you know, how much money you earn, et cetera, as an adult. And so it really matters where affordable housing is located. And we have, we're rightly thinking about that a lot. And we've even more recently seen these like studies that show that it's actually is really important, like the specific neighborhood. Like it's not just who lives, different people live different places. You, it's not a coincidence who chooses where to live because they studied people who moved from one neighborhood to another. And they found improvements in the life chances, you know, like the long-term economic outcomes for kids based on the year that they moved in their life. You know, younger kids did better because they lived in a more economically integrated place, and that had real benefits. And so, you know, this is relevant to affordable housing policy because for a long time, what we did was we clustered all the, you know, lower income housing into a handful of locations. And those locations developed a lot of challenges, a lot of problems. And those problems are the things that those researchers are measuring when they're looking at the changes. You know, it's the, it's the social cost of concentrating poverty that we're, we're trying to address with inclusionary housing. And just the name inclusionary housing even sort of references that idea that we're trying to include and integrate people into the economy. And it's, it's a key goal, and it, it, that goal drives us to focus a lot on the desire to have affordable units in every building. And but what we found is that it's actually not the building level integration that makes the difference. That the research has, researchers have tried to show in a number of different well-funded projects, the, the benefit of like barbecuing with your neighbors or getting job referrals from your neighbors. And they have not found evidence of that. And what they find instead, or not consistently, what they find instead is that being in a neighborhood with good quality schools really makes a difference to kids. Being in a neighborhood where there's not crime or health risks or whatever, like being away from the, the challenges of concentrated poverty makes a big difference for kids, but it's not, it's not necessary to be in the same building. And so what that does is it frees you up as policy makers to decide, we want to build affordable housing. What's the best way to do it? How are we going to get the kind of community that we want? And integration building by building still makes a lot of sense, but it's not as, like I think a lot of times policy makers see it as a pure good, like we really need everyone in every building. And it, and, and you're going to see there's some economic tradeoffs, and so you have to weigh those, and you have to have an appropriate sense of how valuable it is to have that building by building integration. So, just to tell a couple stories, I worked in Seattle. Seattle had a program which they have since phased out or replaced with a, with a more mandatory inclusionary program, but they called it incentive zoning, and it was sort of an optional inclusionary program. They offered a density bonus to downtown developers. And but they let the developers choose between building units on site or paying a fee. And then we looked at all the data. We did like an evaluation looking back at this program over a number of years, and we looked at all the data, and every time the developers had a choice, they chose to pay the fee. And so the question that the city council was wrestling with was, well, should we change the fee and require on-site units? Because, you know, we want on-site units, and the fee is like, some people saw the fee as a loophole or like letting people off the hook or something. And so we tried to get a handle on what was really happening. Just to note a couple of things. One thing that was really real and significant was when Seattle took the money, it took them almost four years to spend the money. And they have a pretty well-established office of housing in Seattle, and they spend a lot of money on affordable housing. But even so, they got all the money during the boom cycle when builders were building a lot, and it took them years to spend it. And the good thing about that is they spent it during the down cycle. They spent their affordable housing money when building wasn't happening otherwise in Seattle, but they didn't do that on purpose. It took them a long time to just process, collect the money, process it, and make new grants, have the money drawn down. So that's a disadvantage of the fee is it takes a little while longer. You get units later generally. Here's the math part. The city of Seattle was requiring units in very expensive downtown, sometimes high-rise buildings. These units cost developers an average of $325,000, and this was almost a decade ago, $325,000 per unit. So the lower rent that was imposed by the program reduced the value of an apartment building by $325,000 per affordable unit. That was the cost of providing a unit on-site. And if they had applied it to ownership, the similar number would have been how much they had to reduce the price of the condo in order to make it an affordable condo. So that's the on-site unit cost. But their fee was set in such a way that for each unit you didn't provide, you had to pay a fee, and the fee came out to $146,000 per unit. And so it was actually less than half as much to pay the fee, which is why every time developers had the choice, they chose to pay the fee. They do the math. But the thing that was surprising to people in Seattle is that when the city collected $146,000, instead of subsidizing one affordable unit, they were able to subsidize three. And the reason for that was they took the city's $146,000 and they invested it in buildings that also got money from the federal government through the low-income housing tax credit. And Seattle's share of those buildings at that time was $49,000 per unit. And what we found was that they had essentially unlimited demand for that. They had 4% low-income housing tax credits. It's the technical bucket that they could have continued to fund, and if they had had more in-lieu money, they could have funded more projects. They had more good fundable projects than they had money. And so what that meant is every time a developer paid the in-lieu fee, the city was able to get an average of three additional affordable units. And we mapped where they were. And what we found was that the city-funded units were in the same neighborhood. So while there's been this history of concentrating poverty, and Seattle has some neighborhoods where historically that's what happened, today where the affordable housing developers in Seattle are building affordable housing is the same neighborhoods that the market-rate developers are building because that's where there's land that's available for development. And they're quite similar in the locations. In a different city, that might not have been true. We can't assume that, but that's what we found in Seattle. The other thing that's notable about just when you balance these things is that with the on-site units, Seattle was requiring 80% of AMI. But when they took the fee, not only did they get three times as many units, but the units they funded served people at between 30 and 60% of AMI. They were, because they're low-income housing tax credit units, they're much more deeply affordable. And so they got more units but also served people who had a higher need for housing. And so that was surprising to a lot of people in Seattle, and it really did change their view on, "Should we allow the fee or should we allow the unit?" They did not switch to a program that was heavily fee-oriented. They still want units in Seattle, but they're a little bit less concerned than I think they might have been if we didn't do this analysis. So we did a similar thing after that in Minneapolis where we helped the city of Minneapolis adopt inclusionary zoning in 2019. And at that time, the city council members expressed a strong preference for on-site units. They said, "We want on-site units." And we did the math that I just showed you for Seattle. We did it ahead of time in Minneapolis. And we said, "Okay, well, let's set a fee that's going to get you on-site units, but still allow developers to pay a fee. Let's set the fee intentionally just a little bit higher than the cost of on-site units." And we made a prediction that if we did that, sometimes the developers would choose to pay the fee, and sometimes they would choose to do the units instead of paying the fee every single time. If the fee was a little more expensive, they'd pay it some of the time and not the rest. And we came back just last year, and we did an analysis of their first five years of implementation of their program, and we found that that's exactly what happened. They got units most of the time and fees about a third of the time. But in order to make that balancing act work, they had to set their on-site requirement at only 8% because otherwise the cost would have been too high. So what they did is they lowered what they might have otherwise charged as the expected number of units on-site. They lowered it to a level that left the fee slightly above so they could get the fee but not have it be the preferred option. And I'll show you a little bit how that works mathematically. So there are basically three different places where cities try to set their in-lieu fees. And there are cities where what they do is a feasibility study, and they try to set the fee at the highest number that a developer can afford. And if you set it any higher, projects can't pencil. And if you set it lower, then there's extra profit for the developer. That's hard to do. I'll talk a little bit more about it in a second, but almost no one does that. Generally, what we see is cities trying to set their fee at a level that's comparable to the on-site cost. And that's what I call the point of indifference. And so there's a number if we say, "Here's how much it costs a developer to provide a unit on-site," you can set the fee at basically that same number. We don't really know. It's different from building to building. It's a sort of imprecise science, but sometimes cities are targeting that point of indifference. So developers can then just choose fee or units. There's no strong incentive one way or the other. And then the bottom end is what we call replacement cost, which is we want to make sure that if a developer pays the fee, whatever the fee is, that it's at least enough that we can get one unit somewhere else. That, maybe you don't get three to one, but you at least get one to one. What is the point at which if you take such a low fee, you can't even replace the one unit you don't get on-site with a unit somewhere else? And there winds up being a sort of a big range usually between that point of indifference and the replacement cost. And so what we see is here, like Seattle set their fee at closer to the replacement cost, like below the point of indifference, well below, and everyone wanted to pay the fee. And Minneapolis set their fee intentionally above the point of indifference, and they got units on-site. But still, developers who would have really found it difficult to provide or expensive to provide on-site units had another option, and it improved feasibility of projects even though most projects did the on-site. The ones that paid the fee in all likelihood would have had difficulty moving forward without that option because they paid extra. It cost them more to pay the fee. So this what I'm trying to illustrate is that you have sort of a policy lever you can use without just banning fees or making the fee so low that it's the thing that everyone always does. But I'll only say a little bit more about feasibility, and then I'm almost done. We talk about feasibility a lot, and it's a really inexact science to predict exactly what is and isn't going to be feasible in terms of these requirements. But we have a good track record. And when I say "we," I don't just mean me and my firm, but I mean cities and consultants around the country are studying how development works. And it's really quite predictable. And you can't know exactly what's going to be feasible in any given month, but over the long term, development needs a certain return in order to happen. And when that return's not available, nothing gets built. And we have seen inclusionary be a piece of what might keep projects from happening in some cities when the requirements are set really high. And there's become a lot of interest on the part of cities to study the economics before we set the requirements and try to tune the inclusionary requirements to what's feasible. And I think that works. It's, like I said, an inexact science, but it's worth doing. And when we set the fees too high, we don't get more affordable housing, we get less. We actually get less market-rate housing and we get less affordable housing. So what happens in some communities, though, is that when the fee is lower than the cost of on-site compliance, we get the feasibility. We pass the feasibility test with the fee, but we have on paper a requirement that's much higher, and it looks to the world like we're requiring 25% affordable housing or something. But then we're charging a fee that's vastly less expensive than what it would cost to provide 25% affordable housing. And so building moves forward because everyone's paying the fee. So, in the Seattle situation, we found that the bonus density that developers got was actually worth more than either the fee or the on-site unit, and that development was feasible, and people were building. But there are lots of communities, and I think there's a risk that Santa Fe is one of them, and so you have to think about this more, is that the on-site requirement on paper might not be feasible, but the fee is low enough that projects move forward because they can pay the fee. And what happens in that context is if you then remove or replace the fee, even if the fee you set is below the point of indifference, you end up with an infeasible program. And so there's a risk of increasing the fee too much for feasibility, even if you're still below the cost of on-site compliance. And so we have to juggle these things and think about them. And it's common to have this problem. And it's increasingly common because the way that markets have trended over the last 20 years in expensive places in America has driven up the cost of on-site compliance really pretty significantly. It's just gotten really expensive to build, and the cost of construction has been going up much faster than inflation. And so when that happens, the fee becomes more important to developers because they start to feel like, "Oh, we couldn't do the on-site, but we could do the fee." So this is the tradeoff. The caution is just you have to actually think both about fees versus units and also about feasibility at the same time. I wish it was easier, but that's just the bad news. Let me close by just pointing out this framework. I really like this way of thinking about what we're trying to do when we're doing an inclusionary housing program. There are kind of three separate things we're doing. On the one hand, you're trying to make your city a vibrant, exciting, livable place that people value and want to live in, and that generates demand. At the same time, you want to generate supply. You want to make housing abundant. You want to produce new opportunities for people to live in your city at every income level. Then, lastly, if you do those first two things, you wind up with a pretty intense affordable housing problem. So we also want to require some mechanism for funding affordable housing. Often, in inclusionary, what we're talking about is using the abundant housing as a source to pay for some of the affordable housing. How that looks is we're creating middle-income housing or market-rate housing on the one hand, and then we're creating low-income housing on the other hand with these requirements. These two things are a little bit at tension, and feasibility is the tension. If we require too much affordable housing, we push down the rate at which we're creating abundant market-rate housing. If we push up the rate of abundant housing, we create more of, you know, we don't have that same resource for affordable housing. One way to think about it is land values. When we make the place better, more attractive, nicer, we push up land values. When we relax the zoning rules, make it easier to build, zone for more density—all of those things that the development community rightly says these are the things that'll make us build here—when we do those things, we increase land values. Property owners can sell their land for more. When you zone it to allow more density or when you provide better transportation or better parks, you're pushing up land values. Then, when you require affordable housing, when you say you have to build or you have to pay into a fee, you're pushing land values down, and you're recapturing some share of that value that you created in the rest of that process. So what we're trying to do when we think about these tradeoffs is to make sure that we're pushing the land value up by more than we're pulling it down. We're capturing only a share. We're not over-capturing too big a share of the value in order to subsidize affordable housing. I'm going to stop there and see if you have questions or comments. I know that's a lot of economics. No worries. Thank you so much, Mr. Jacobus. I will allow any committee members to ask questions to begin. Councilor Cassie, go right ahead. Thank you so much, Chair, and thank you again, Rick, for being here. I really have always appreciated the way that you talk about the issue of tradeoffs and a lot that we have to think about when we are setting this fee. A couple things. One, I know that you had touched on this in your, I don't know if it was in your talk or during the lunch afterwards, but one of the big points of conversation, especially in regards to Santa Fe, was it's not just about collecting the fee, but it's also about the strategic use of the fee. And that potentially we weren't using it as strategically as possible. I know that we haven't had a LIHTC project within the city for a number of years. We had spent a lot of time focusing on providing supports for rental and down payment, which is great, minus the fact that there was nowhere to rent or nowhere to have a support for down payment. Could you speak a little bit more to that? It sounds like Seattle did a really good job of really strategically utilizing those fees to actually get what they wanted. Yeah, and I don't tell that Seattle story to imply that 3:1 is the normal tradeoff, right? It's different everywhere. It's just Seattle has a pipeline of projects, and so it's easy for them to do that. It's much harder for any smaller place to use the fees, and what you see is it's sort of lumpier. You collect fees and then you put them out for development. But, so the choice is about do you think you can use the fee, and then when you use the fee, can you get as much bang for your buck? The way we typically talk about it is development units, not rent subsidies or other programs, but can you build? Can you use the fee to build? There's a real advantage to building, and it's, I don't mean to suggest it's the thing you have to do, but the advantage to building is in addition to providing an affordable unit, you're also increasing supply. So you're adding abundant housing and also adding affordable units. When you do rent subsidies, you're boosting demand, not supply. So that's helpful for the families that get helped, but in terms of its overall impact on the market, it's pushing rents up overall, not down. On the flip side, you can just do a little bit of rent subsidy. For a development of a new affordable project, you have to do a bunch. You have to have a significant pool of money. So the way you would evaluate whether fees would make sense in San Jose is to project how many projects are we likely to get in the future, and if they all paid the fee, how much would it amount to? Then, on an annual basis or on an every two years basis, would we have enough money to fund an affordable housing tax credit project? If we put money up, and this is another question, it's a state policy question, but how much money do you have to put up locally in order to be competitive for the federal tax credits? The tax credits are allocated by the state. Do you compete successfully for them if you have more money? What we see in a lot of places is the communities that are willing to provide their share of the cost do better at bringing in the outside money. So that's another question: if you had the money, could you spend it, and could you match it with state money or not? If the answer was no, the whole balance between fees and units changes. If you have to provide all of the subsidy with local money, you need a lot of it. But if you have state resources, and I believe you do, but if you have state resources that you could be competing for and you're not, then not having the cash is actually costing you affordable housing units. Yeah, got it. Thank you. Recently, the city has started to change our strategy a little bit, and I think that this is going to be part of that larger conversation as we look at fees. The other case study that you brought up of Minneapolis, correct? Yeah. And only requiring 8%. That's, I mean, for us, we have 20% if you're doing for sale, 15% if you're doing rentals. That seems extraordinarily low to me. And again, curious about how that balances out with this need for more units overall and how long were those supposed to be affordable? We know that our affordability period is actually quite short compared to other communities. I think it goes much longer. So that just struck me as a very low requirement. Yeah, I should have actually included a slide about the length of affordability. I believe you're requiring 10 years. So when you have a unit on site and it's affordable for 10 years, you get, you know, 10 years worth of value out of it. When you subsidize a tax credit project, you get 40, 50, or years or longer. In Minneapolis, they require, I think it's 50 years on their inclusionary units as well. So there's less of a difference for them in that. 8% was a low requirement for Minneapolis. The reason that they ended up with 8% is that, in that sort of make abundant housing on the one hand and capture some of the land value on the other hand, Minneapolis made a really big mistake, which is that they upzoned the entire city. They eliminated all parking requirements, and they spent hundreds of millions of dollars improving the transportation infrastructure and pushed land values way up. At the end of that, they decided that they wanted to require affordable housing. So instead of offering an incentive of you can have extra density if you do affordable housing or you can have reduced parking, they already gave all of that away. They felt, and I think the economics supported the idea, that if they charged 15%, and they didn't set a fee that was substantially low, right? If they really had a fee that was comparable to the cost of 15%, what that would have done is pushed land prices so low that property owners would have resisted selling their property, and development would have come to a standstill. So when we think about feasibility, what we're really doing is guessing about the willingness of landowners to take less money for their land. When you require 15%, that implies this reduction in land value. But then if your fee is really low, they can still get more because the builder's actually going to pay your fee. So I think the question in your case is how often are developers choosing the on-site option versus paying the fee? I think the answer is mostly they're paying the fee. If they're mostly paying the fee, that's strong evidence that the fee is a lot less expensive than the on-site. So even though on paper you're requiring 15%, you're not really, your program right now isn't a 15% on-site program. The question of whether 15% would be feasible is separate. It might be that it's feasible. If you really, if you just eliminated the fee or you raised the fee, they might do 15%. But you might find that 15% would push land values down too much, and you'd have a slowdown in building if you did that. Well, and that's where a lot of that land economics assessment component and the feasibility assessment comes in that you and others do who have that background. I certainly do not. Math has never been my strong suit. So, last question, and then I will yield the floor. The other challenge that we're really running into in Santa Fe is this complexity of, you know, we do not allow a fee for people to build or for homes that are for sale. This is only for rentals. But what we have been discovering is, as you mentioned, the cost of construction has really gone up. So in order for developers to subsidize those affordable units, our market-rate units are hitting astronomical prices, and it is, I mean, the market will sustain it. People pay a lot in Santa Fe, but it is pushing out a lot, you know, the workforce housing, the missing middle. I recently heard that there was a developer who had done a workforce housing development in Cusus down south, wanted to come do something similar in Santa Fe, took a look at our inclusionary zoning policy, and was like, "Can't do it. I'm out. No more." How is that balance being struck right now as we are seeing these vast changes in the cost of construction, the cost of development? We have a kind of insecure construction economy with us not knowing what the federal government's going to be doing with tariffs. So, how do we navigate these fun waters that we're dealing with right now? Yeah, that's a big question. And let me say, actually, your question suggests something about understanding the math. You can hire an economist to study the development environment and do all the math. You have to ultimately understand what does it mean? And your question suggests you do that. At the end of the day, it's not that developers are going to charge more for their housing because they have to cover this cost of inclusionary. It's that they don't have the option to charge less. And so the only projects that move forward are the ones that are really expensive. They can't exactly just pass on the—they can't build exactly the same product and just charge more because the market sets how much you can charge. And if they could, people can buy somewhere else, they're going to buy somewhere else. But the modest projects, the projects that would sell at a more modest price, might pencil in a world where you didn't have a high inclusionary requirement and might not in one where you did. And so what the cost of inclusionary, and it winds up being one of many things, right? It's not all by itself usually the reason why a project like that doesn't move forward, but it can be the tipping point for certain projects. And so what a lot of what an economist will do in a feasibility study is try to identify where that tipping point is and how big a role the inclusionary requirement plays, what percentage of the feasibility is driven by this requirement. And one of the things that's made these programs really hard is that you set a requirement, 15% or 20% at one point in history, and then 10 years later home prices are three times what they used to be and incomes are two times what they—and the whole market is completely different. And so you almost have to have an update to your view of the market every five or eight years. On the flip side, you don't have to stay month-to-month. It hasn't worked when cities have tried to do it too often. But what it costs to build a house now is just really different than what it cost to build a house when you adopted your program. And the prices have gone up, but the incomes haven't gone up as fast. And so what we're seeing in California, and I think it's sort of a cautionary tale—you're not here yet, probably in New Mexico—but what we see in California is that a lot of cities have stopped requiring on-site units for sale because the gap between the cost of the unit and the affordable price has gotten to be so big. And by so big, I mean half a million dollars big. And when that gap is half a million dollars, we say, "Well, what could we do with that half a million dollars if it was in the city's trust fund? We can subsidize one affordable ownership unit or we can subsidize 10 rental units in a tax credit project." So, you probably aren't even close to that, but that's a pretty easy number to study. And then you can look at it and say, "What's the appropriate requirement based on today's economics?" And I just think you're at the point where it makes sense to do that study. And I'm not saying that because I would want to do it. I think it makes sense for you to have someone do it. Yeah, I think we've all hit that moment of realizing that we've grown out of our policy, and we've learned a lot from our policy to begin with. And maybe some things we would want to do different regardless of whether or not the market had changed, but the market has changed drastically. And while New Mexico, we're not hitting the California discrepancies—well, and I would say even in Santa Fe, I mean, I always say that I put on my California goggles if I want to feel like Santa Fe is affordable. But Santa Fe, I mean, we're a bit of our own unique beast here, and it's definitely that gap is getting bigger and bigger and more challenging, is what we're hearing from developers. So, but I will yield the floor and thank you again so much. Really appreciate it. Thank you, Chair. Yeah, thanks for having me. Thank you, Councilor. We really appreciate it. It was an amazing presentation, and it was such a wonderful opportunity for you to bring this to us. So, thank you. Anyone else from the committee have questions? Councilor Chavez? I just have a comment. I think that there's a lot for us as city councilors—and we have our deputy city manager here—there's a lot for us to understand around this. And I think that we probably have a lot of information in the land use department already. So when we're talking about work sessions, we have one coming up this week. I think this is somewhere that we should invest some time so that we can approach a solution as a governing body and have the same understanding around it as well. So I just wanted—I have to go pick up my sons from basketball practice. My parents were busy. So I have to run out, but I just wanted to put it on your radar. I think that would be somewhere where we, and land use in general, we know that whole thing, but it's if we want to address affordable housing and we already know that we're not using the money we have there the way we could to have true impact. So there's a lot of discussions around this, and this would fall beautifully into that work session format where we're receiving information, making sure we understand it the same way, making sure that we have similar goals and are all kind of working in the same direction to achieve them. I think that would be something to put on your radar. And thank you for the presentation. I appreciate it. I'm sorry I arrived late, but great information. Thank you. Thanks. Thank you, Councilor. Councilor Faggali. Council Barrett. Okay, then I'm going to go ahead. Mr. Jacob, I have—thank you, Councilor Casset—hit a lot of the points. I have just a few more questions. And really it has to do with some of your experience with other things in tandem. Now, we talked about transit. We're currently going through a general plan and a zoning plan update. I was going to say Chapter 14, but you don't care about where our chapters are. But we are thinking about this in a larger scheme of how to make our city affordable, especially because we're in a pretty condensed city. We only have about 95,000 folks that live here, 150,000 during the day. So, at scale, I don't know if you could talk a little bit about the feasibility and how it might also work with rent caps. So, currently our state prohibits anything close to a rent cap, but we are looking to change that. Have you worked in communities where that was an influence? Yeah, usually where we see rent stabilization is it exempts new buildings. And so where you have a rent stabilization capping the rents on existing buildings, excuse me, a developer building a new building would be able to charge a market rent. The rent cap will hold down—so sorry, I have a cold I'm getting over. Thank you for being here with us. I know we're also all getting sick around Santa Fe as well. We send you our blessings. Sorry about that. The rent caps will not affect directly the development project, but the new projects will have affordable units in them. There'll be a bigger difference between the market rent and the affordable rent. Does that make sense? It does. And so I wonder what the relationship is with the subsidies currently. And I'm sure you know this by being part of our community and coming in to present here, but most of the developers, as you alluded to, are taking that option of the fee. We aren't seeing a lot of affordable developments, and there are some issues with the cost of actually building, right? So once the developer has come and bought the land and got the permits, potentially there's a threefold increase in that cost, and they're looking for new funding. So we are seeing less affordable units. There is a will on the governing body. There are some folks that would like to see it be more like Seattle and have that requirement. I don't know if in our community, and I know that this is just a matter of opinion, we would see more units. Which way? I think if we were to require them, we might see less development, which is sort of what Councilor Casset was also alluding to. There was a time where we saw very little development even in market rate. Yeah, yeah. It's really hard to know, and it really is worth your time to do a study to confirm that, but it sounds plausible to me that if you were to simply require always 15 or 20% on-site, that you would learn the hard way that that created a barrier to at least some of the projects that are feasible now. And you'd end up with potentially fewer projects and projects that were sort of the higher-end projects and not as many of the projects that might, you know, serve maybe not middle income but closer to middle income. I don't know that that's true, and it's worth confirming it. Unfortunately, what you hear is that that's the situation, and you hear that everywhere because it sort of—it's what you want to say if you're a developer. It makes sense for developers to not want to have these requirements. So we hear that even in markets where it's not true, but it's true in more and more markets these days. And the places where it's true are the places that have done the most to make development feasible. We used to—it used to be very common for communities like Santa Fe to make it really hard to build, to have, you know, sort of a majority on the council that doesn't want building and a planning commission that doesn't want building. And when you constrain what can be built, it's then very easy to capture affordable housing from the few projects that get built because the only ones that get built are highly profitable. And so we used to have a much greater share of the inclusionary programs in the country that could charge 15 and 20% feasibly. And now as cities like Minneapolis have, you know, or Seattle have made it possible to build, they've pushed down the margins in a way that's helped with, you know, helped make more projects feasible and helped bring rents down. And I'll just give the example back to Minneapolis that when we did their study in 2018, 2017, what they were after was units at 80% of median, and they set their target slightly lower than that, but that was a goal: we want more units at 80%. When we just updated their analysis, they built so much housing in Minneapolis that they now have 80% rental units coming in the market. So they have buildings that have affordable units that are renting for the same rent as the market rate unit in that building. And that's because they've done a really good job of making it possible to build and bringing rents down. That doesn't help people at 40% of median at all or much. But it just shows that there's an important interrelationship between how much you build and how much you allow development and what you can require in the inclusionary program. And so it's worth studying it, but it could very well be that your requirements might be high, and you'd have a better sense of that if your fee was higher because your fee is definitely much lower than the cost of on-site. And I think many of us agree that we need to take a look at how much that fee is. Councilor Barrett, you had some comments. I was going to be my question too, because it seems like fee-in-lieu has gotten a bad rap, but that's not necessarily the case. You've given us all these different examples of Minneapolis and Seattle doing things differently and how they've made fee-in-lieu to get units out there. So that was my question too, like how fee-in-lieu is studied, and then of course, with each project and developer, it's different and that the rates of fee-in-lieu per project and how they are determined. And then if we're continuing to study that in a robust way to decide, "Hey, we need to be charging a much higher rate for fee-in-lieu," you know, different projects. So that was my question. Yes, definitely. And so Rick, Mr. Jacobus, I really appreciate it. I don't want to have you here while we continue our discussion. I want to make sure we don't have any more questions for you, but thank you so much. And I did go ahead and email some materials to the committee, and I was wondering if we could get those into the packet. We do some studies through the Santa Fe Homes program looking at what it could potentially be putting into our coffers. I think that the mansion tax or the excise tax is also something that we're looking at in those coffers. But to Mr. Jacobus's point, the way we're spending those dollars really needs to be taken a look at as well. Councilor Cassutt, anything to add? I know that you're quite an expert in some of, especially, the Santa Fe Homes program. No, I mean, I think that we've covered all of the very complex issues we are going to have to be wading through as we move through this. And I would agree with Rick, that getting some data and getting some information is going to be important. But I think it would also be really interesting that we look at how these programs are evaluated over time so that we set up future governing bodies for knowing when we've hit a tipping point and so that they can do a big reassessment. And so, a lot of really good information. And Rick, your book that you wrote is free online, correct? Can you remind us what the name of that is? If you go to the Lincoln Institute for Land Policy and you search for "inclusionary housing," it'll come up. It's just called "Inclusionary Housing," but you can also get it on Amazon, but then they make you pay. Well, it's definitely there. I've read it and I recommend it for anybody else who's looking to learn more about it. So, thank you. Thank you. Thanks for having me. Thank you so very much. Thank you, Councilor Cassutt, for the introduction. We're going to be moving on to the one item on consent that was pulled. Councilor Faggali, would you like to read that into the record, please? Sure. So, I pulled item H, which is the item about the city manager's credentials and qualifications. I just had a minor technical amendment. I think Miss Spears is here to assist us. My addition was just on line 24 of page two in section C in the version that we have, which is to add a comma and the words "the city." So that the end of that sentence, or the middle of that sentence really, "the city opens an application for city manager or begins any other process," would become "the city opens an application for city manager or the city begins any other process." And that was just because I had a really hard time reading that sentence and I didn't want other people to have the same issue. So that fulfills the reading it in requirements. Are you moving that amendment? Yes, I move for that amendment. I don't know if Miss Spears has anything to add. Great. Then yes, I move that we amend item H as presented in amendment A. Madam Chair, point of order. I do think that we have to actually read the caption into the record and then we have to have a main motion on the floor before we can move amendments. That is correct. Thank you so much, Councilor Cassutt. So, we'll go ahead because we're going to give staff a little bit of a break. Councilor Faggali, would you mind reading that caption into the record? Thank you. So, it is a bill amending Santa Fe City Code 1987 section 2-4.2 to require city managers to be International City Manager Association, quote, ICMA credentialed or credential eligible unless an appointment and consent of such a candidate is not possible after five months, requiring candidates for deputy city manager to have the same qualifications pursuant to section 2-4.6L, removing portions of section 2-4.3 that conflict with city charter, and removing the prohibition for an acting city manager to employ and discharge personnel. Would entertain a motion to move the bill. Move to approve. Second. Perfect. And now we can entertain a motion to move the amendment. Thank you, Councilor Cassutt. I would move to adopt amendment A. Second. And we have a motion and a second. Elizabeth, could we have a roll call vote, please? This is on the amendment. And then we will move, just to be clear, on the original motion. Councilor Faggali? Yes. Councilor Barrett? Yes. Councilor Cassutt? Yes. Chair Castro? Yes. Motion passes. Perfect. Now we will move on to the original motion as amended. If we could get a roll call, please. Councilor Faggali? Yes. Councilor Barrett? Yes. Councilor Cassutt? Yes. Chair Castro? Yes. Motion passes. Wonderful. Thank you everyone. That concludes the consent agenda. We're moving on to matters from staff. Why don't we go ahead and start with you, Director Nielson. Great. Thank you, Madam Chair. Good evening, counselors. Great to be here with you this evening. I've got a few updates from the Office of Economic Development and some of our partner divisions. We've got a lot going on as the new year has started. So, I want to make sure that you and your constituents are aware and also would ask that you help spread the word about some of our initiatives. So, we kicked off our "Go Local, Go Different" campaign prior to the holidays and that is in full swing. Reminder that this is our effort to really push supporting local, shopping local, hiring local, and we do have an opportunity for businesses to sign up and participate. When they do, that makes them eligible for a toolkit, stickers, decals, magnets. My bag is full of them right now. So, I will be handing those out to you guys. And we also have a rewards pass, too. I want to make sure that folks are aware of. And that allows our residents to get incentives from the participating businesses as they shop local. So, it's a really exciting program. And if folks are interested, they can contact us. As a part of "Go Local, Go Different," we also have and are working on a couple of different funding streams. We just launched our "Go Local, Go Different" fund. This is our community investment program. We just had a webinar this week and answered questions and we'll be posting that webinar online if folks want to dive deeper into understanding what our eligible costs. I would say that obviously, as per the economic development fund, we are able to support a number of community programs, initiatives, events, placemaking activities. This is a really great opportunity for your neighborhood and business organizations. Anything that is helping to support, grow, strengthen our economy, we are open to seeing ideas and considering that for funding. Reminder, deadline is February 5th. These are for activities that occur prior to the end of the fiscal year. So reach out to us. All information is available online. We also have our "Books Behind the Business" series. This is a book club. I'm really thrilled about this. Would love to see folks attend. This is our partnership with the libraries where we are working on launching business centers at the library. We're so close. The book clubs are in full swing. So our upcoming one is on the 27th. We'll be hosting that at the Southside Library. We have the founder of Southwest Contemporary that will be speaking about, I think I'm going to kill the name of this, but "E-Myth" is the book that has inspired their journey and we'll be discussing that. Great place to meet entrepreneurs. Check out your local library. The last thing I'll mention, I have a whole list, but the last thing I'll mention is an initiative that we are thrilled and so excited to launch, and that is on the 29th. That's next Thursday, not this Thursday, next Thursday. This is the kickoff of our EDAC subcommittee called the Small Business and Entrepreneurship Working Group. This is our place that businesses, we are inviting our public, our businesses to come share concerns, ideas, really an open forum to get us an understanding of business sentiment. So we are helping to inform EDAC about certain programming and policy desires that are being pulled directly from our businesses. So this is being chaired by Dulce Marty and this will be at 9:00 AM at Benildis Hall on the 29th and it'll be for about an hour and a half. We'll have an online survey that will be evergreen and accompanying this effort and these will be quarterly. So, we're thrilled. We have been, I'm looking at Councilor Cassutt through the screen, but we've been talking about this at EDAC for a while and finally seeing this in fruition. So, I would really encourage you to help spread the word and register for that event. It'll be hybrid, in person and online. Thank you so much. And how do we sign up for your email newsletter? You can go to the city's website and search "economic development" and on the first page on the left-hand side of the screen, there's a sign up for our newsletter. Perfect. Newsletters. Yes. And that way we can get all this information out to the public. Thank you so much, Director, and a big welcome. So, Director Sanchez, this is your first meeting with us. Welcome. Castro, thank you very much. So, I'm going to start off with updates from seniors because that's what I have the most of. I've recently also been named interim Community Services Director. So, I'm still working with staff on all the departments to get their updates and find out exactly what they're working on. So, tomorrow we do have a dance for the seniors over at the Eagles. You're all welcome to go visit and mingle with the seniors. They really enjoy it. We usually have 150 to 200 people show up to our dance. We have, you know, every day we're having at least 250 to 300 people coming to the Meg Center daily and taking part in our different activities, enhanced fitness activities, congregate lunch, of course, all our activities, ceramics, jewelry making, wood carving, all that type stuff. So, it's, you know, it's a real, you got a lot going on over there and as soon as I have an update on everything else, I'll put just more information. Wonderful. And congratulations on the update to the building. And also sitting in for recreation. So, if we have any recreation questions, we might send them your way. Correct. Yes. Thank you so much. And Marcel, I know that you know you might not have too much to say, but thank you so much for being here. Just want to welcome you and I'm looking forward to working with you, Jamie. It's been truly a pleasure and I'm so happy that you're still on this committee. That's all I want to say. Welcome, Elma. Thank you so much. Work with you. Yeah, I'm so excited and unfortunately, Director, this might be the first time that no one on this committee qualifies for the senior dance, but we do appreciate the invitation. For the next, we have matters from the committee. Any counselors want to? Counselor Cassi, we'll start with you. No. Okay, we'll start on this side. Counselor Faggali, go right ahead. Yeah, thank you. Thank you for having us. It's very nice to meet the two of you, Jo, Director Nelson. We are acquainted, but yeah, very excited to work on this. That presentation was excellent. I'm so glad to get all that extra information and to have that available to us as a council. I think that's really excellent. So thank you. Please feel free to send me any ideas that you might want to have. I mean, obviously send them to Counselor Castro Matt and Madam Chair, and I will work with appropriate staff to see if we get that. Thank you. Thank you, Counselor Barrett. Yeah, again, nice to meet everybody and thank you. Glad to be here. Thanks for rolling with us and practicing the procedures and thank you for helping us along here. It was really informative. That was an amazing presentation and I learned a lot and it's a hot topic. We were talking about it when we were running, affordable housing, top of mind for everybody. So pertinent and for our council because we have a lot of work to do around affordable housing. So yeah, just glad to be here and excited to be on this committee. Thanks everybody. Wonderful. Thank you so much. So we're on to matters from the chair. I just want to thank everyone for bearing with me. Counselor Casset, thank you so much. It has been an honor to serve with you. I have some very big shoes to fill and I'm looking to talk to Marco about what it means to be co-chairs because this is a big job. But it's really important that we're able to start with such an important presentation. So thank you for that. Any additional information that you can send us, but I do want to direct folks to the Santa Fe Homes program. A lot of this information is available on our website. I know it's dense, but reach out to us if you have any questions. And with that, our next meeting is going to be February 4th, and we will see you then. We are adjourned and it is now 6:02. Good night everybody. Good night.