Inclusionary Housing (PA2022-045)

What is Inclusionary Housing?

Inclusionary housing is a requirement placed upon developers to provide a minimum percentage of lower- and moderate-income dwelling units within new residential developments. Inclusionary housing ordinances place income eligibility criteria for defining affordability, pricing criteria for the affordable units, restrictions on resale and subsequent rental of units, and may contain provisions for the payment of fees in-lieu of providing affordable housing units on- or off-site.

On September 13, 2022, the Newport Beach City Council adopted the 6th Cycle Housing Element for the 2021-2029 planning cycle in response to the Regional Housing Needs Assessment (RHNA) allocation of 4,845 new housing units for Newport Beach. On October 5, 2022, the City received a letter from HCD certifying the City's Housing Element as being in full compliance with State Housing Element Law.

On September 24, 2024, the City Council adopted a narrowly focused amendment to the Housing Element, which revised portions of Sections 3 and 4, as initiated through Resolution No. 2024-58, and as adopted by Resolution No. 2024-73. Final Adopted and Certified 6th Cycle Housing Element (September 13, 2022), as Amended on September 24, 2024, is available by clicking here.

The RHNA allocation of 4,845 new housing units is broken down into income categories as follows: 1,456 units for very low-income households, 930 units for low-income households, 1,050 units for moderate-income households, and 1,409 units for above-moderate income households. This substantial RHNA obligation is a challenge to accommodate due to prevailing project development costs and high land values in the City. Therefore, the City must evaluate a variety of policies, regulations, and incentives to provide affordable housing. One such policy is the adoption of an inclusionary housing program that would require housing developers to provide units designated for very-low, low-, and moderate-income households interspersed with the market rate housing.

Policy Action 1K (Inclusionary Housing Policy) of the 6th Cycle Housing Element requires the City to adopt an interim inclusionary policy within six months and adopt an ordinance within three years of adoption of the Housing Element. The policy also requires the City to assess and analyze a variety of inclusionary housing policy options, standards, requirements and regulations to determine the best course of action. Based upon this initial assessment, the City will determine the appropriateness and application of inclusionary policies, and adopt policies, programs or regulations that will produce affordable housing.

To date, Community Development Department staff conducted several study sessions with the City Council to seek guidance for the future inclusionary housing program. These study sessions are listed and available for review by clicking on their links below.

• September 14, 2021 - City Council Study Session Presentation
• March 22, 2022 - City Council Study Session Presentation
• January 24, 2023 - City Council Study Session Presentation 

Keyser Marston Associates, Inc. (KMA) has been engaged to assist in evaluating the potential for a Citywide Inclusionary Housing program, including the preparation of various necessary financial evaluations. These financial evaluations help to identify the supportable inclusionary housing program requirements that balance the interests of property owners and developers against the City’s need for affordable housing. They include legal background of inclusionary housing programs in California, anticipated financial impacts that inclusionary requirements would have on both ownership housing and rental housing projects in Newport Beach, recommendations for a supportable minimum inclusionary housing percentage, and recommended in-lieu fee payment that a developer can pay as an alternative to on-site construction.

Three financial impacts analyses have been prepared by KMA and they are listed as follows:

• The February 17, 2022, Draft Inclusionary Housing Financial Evaluation and is available for review by clicking here
• The March 19, 2025, Inclusionary Housing: Financial Evaluation prepared for focus areas within the City and is available for review by clicking here.
• The January 22, 2026, Airport Area Ownership Housing Development Addendum to March 19, 2025, Inclusionary Housing: Financial Evaluation; and is available for review by clicking here.