Redwood City could lower the affordable housing requirement

Lowering the requirements by 25% could be the financial tipping point developers need to move forward on their projects, which are at risk of being stalled due to tariffs, high inflation, labor shortages and elevated interest rates, Assistant City Manager Patrick Heisinger said.

“Things in December really started rolling and getting better, and then the whole thing about tariffs really came down,” Heisinger said.

The city has about seven projects in its development pipeline, equaling 2,584 housing units, 37% of which are estimated to be affordable units. If they all move forward, the city would generate about $25.6 million in impact fee revenue, each of which funds a different service or infrastructure need, such as parks and below-market-rate housing. According to a staff report, the reduction could result in 57 fewer low-income units, provided all the developments end up getting constructed, but Heisinger said it’s better than risking the projects falling through.

“If the projects do not move forward, the city gets nothing so we’re really trying to look at this in a way that we don’t give up too much but also trying to incentivize projects to move forward,” he said.

Because the developments would result in more than 900 affordable units, Heisinger said city staff preferred lowering the affordable housing impact fee and inclusionary requirements, rather than lower a different impact fee, such as parks or sewer funds.

Per state mandates, the city needs to produce 4,588 new housing units between 2023-31 and is slightly behind on its goal thus far.

“I think it’s better to have some affordable housing rather than none, and if the projects don’t get built then you don’t get any affordable housing, and it definitely seems like a very challenging environment,” Commissioner Dylan Finch said during a meeting Aug. 19.

With the reduction, large developments of 20 rental units or more would see a 15% inclusionary policy — down from 20% — which Heisinger said is on par with many cities throughout the county. Large, for-sale developments would have a 11.25% inclusionary policy, and smaller projects would have to pay $15-$18.75 per square foot.

“I think this is a brilliant idea,” Commissioner Kimberly Koch said. “We have got to do something for the state of our city and the current state of our residents.”

The reduction would apply to projects that are entitled by June 30, 2026, and obtain building permits for vertical construction by June 30, 2027.