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Report regarding Essex Portfolio, L.P.'s request to amend the Affordable Housing Agreement for the 543-unit housing development project located at 7 South Linden Avenue. (Nell Selander, Economic & Community Development Director)
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Report regarding Essex Portfolio, L.P.'s request to amend the Affordable Housing Agreement for the 543-unit housing development project located at 7 South Linden Avenue. (Nell Selander, Economic & Community Development Director)
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RECOMMENDATION
Staff recommends that the City Council consider Essex Portfolio, L.P.'s (Essex) request to amend their Affordable Housing Agreement to reduce or modify the number and type of affordable housing units in their private, market rate development housing project located at 7 S. Linden Avenue. Staff is not recommending approval or denial of this request, rather presenting it with discussion and vetting by the City's economic consultant for the City Council's consideration. Granting such a reduction or alternate means of compliance is a policy question that the City's Inclusionary Housing Ordinance defers to the City Council for approval.
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BACKGROUND
On March 16, 2023, the Planning Commission of the City of South San Francisco approved Essex's request to build a new 543-unit multi-family rental apartment complex located at 7 S. Linden Avenue. The Conditions of Approval included the following General Planning Division condition, "Prior to issuance of building permits, the applicant shall execute and record an Affordable Housing Agreement consistent with SSFMC Chapter 20.380, Inclusionary Housing Regulations." Anticipating that they may be pulling a building permit in 2025, Essex and their legal counsel began working with the Economic & Community Development Department in 2024 on preparing the Affordable Housing Agreement (AHA) as required by the Conditions of Approval and in conformance with South San Francisco Municipal Code (SSFMC) Section 20.380. The City uses a template AHA, which is customized to each development prior to building permit issuance. After lengthy discussions and negotiations, the AHA (included as Attachment 1) was executed between the City and Essex on March 11, 2025.
The AHA between the City and Essex requires them to provide 15% of the total number of units in their development at below market rate rents and specifically that 10% of units to be offered at a rent affordable to low-income households and 5% of units to be offered at a rent affordable to very low-income households. This equates to 81 affordable units, 54 at the low-income level and 27 at the very low-income level. The AHA and the City's Inclusionary Regulations specify how the rents are calculated, with low-income units being priced at 60% of the area median income, divided by 12 months in the year, multiplied by 30% as an acceptable housing expense, and then reduced by a utility allowance. Very low-income units are priced at 50% of the area median income and follow the same calculation as the low-income units. These formulas are detailed in SSFMC Section 20.380.002, Definitions, adopted in 2018 and available at the following link: https://ecode360.com/43453356#43453380
Following execution of the AHA, Essex proceeded to pull their grading permit on March 19, 2025. Shortly thereafter, on May 6, 2025, their building permit was issued. The project is now under construction. Notably, the developer elected to pay $14.5 million in impact fees (for childcare, transportation, library, parks and recreation, and public safety) on March 21, 2025, well in advance of when these fees are required to be paid for residential projects. Impact fees on residential projects are due at certificate of occupancy (or roughly 18 to 24 months from now).
In a letter dated September 17, 2025, Essex requested that the City consider an amendment to its AHA changing the price calculation of a portion of the affordable units or reducing the overall number of affordable units (see Attachment 2). Essex communicated to the City that the reason they have requested this amendment is because their project financing and underwriting assumed the low-income rents would be calculated at 80% of the area median