TO: PLANNING COMMISSION
FROM: DAVID CRABTREE, INTERIM COMMUNITY DEVELOPMENT DIRECTOR
DATE: OCTOBER 20, 2026
SUBJECT:
Title
CONSIDER AN AMENDMENT TO THE CLAREMONT ZONING CODE (TITLE 16 OF THE CLAREMONT MUNICIPAL CODE) AMENDING CHAPTER 16.036 (INCLUSIONARY HOUSING) TO ALLOW PAYMENT OF THE IN-LIEU FEE BY RIGHT FOR FOR-SALE HOUSING DEVELOPMENT PROJECTS SUBJECT TO THE INCLUSIONARY HOUSING ORDINANCE (FUNDING SOURCE: GENERAL FUND & INCLUSIONARY HOUSING FUND)
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SUMMARY
Claremont Municipal Code (CMC) Chapter 16.036, the Inclusionary Housing Ordinance, requires new for-sale and rental housing development projects of five or more units to provide a percentage of units affordable to low- and moderate-income households, or to satisfy the requirement through an in-lieu fee or land dedication. Under CMC Section 16.036.040, projects of five or six units may pay the in-lieu fee by right, while projects of seven or more units must obtain discretionary City Council approval, supported by findings that providing the units on-site would create an unreasonable and unavoidable economic hardship. The proposed Code Amendment would allow developers to pay the in-lieu fee by right for for-sale development projects of any size. The in-lieu fee provisions for rental units would remain unchanged.
On September 8, 2026, the City Council held a study session on the Inclusionary Housing Program and directed staff to amend Chapter 16.036 to allow payment of the in-lieu fee by right for all for-sale housing development projects regardless of size, including projects currently in the planning process. The City Council also directed staff to conduct a fee study to establish an in-lieu fee that would incentivize developers to choose it. The City’s consultant, Keyser Marston Associates (KMA), is currently conducting that fee study, which is anticipated to be complete when the Code Amendment goes to the City Council in November 2026. Since the fee amount is set by City Council resolution, the updated fee schedule will be considered by the City Council separately and is not part of this Code Amendment.
The attached Resolution (Attachment A) and draft ordinance (Exhibit to Attachment A) implements the City Council’s direction. Because the amendment would amend the City’s Zoning Code, public hearings are required before both the Planning Commission, for a recommendation, and the City Council for final approval.
RECOMMENDATION
Recommended Action
Staff recommends the Planning Commission adopt A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF CLAREMONT, CALIFORNIA, RECOMMENDING THAT THE CITY COUNCIL ADOPT AMENDMENTS TO CHAPTER 16.036 (“INCLUSIONARY HOUSING”) OF THE CLAREMONT MUNICIPAL CODE TO MAKE THE IN-LIEU FEE BY RIGHT FOR FOR-SALE HOUSING DEVELOPMENT PROJECTS SUBJECT TO THE INCLUSIONARY HOUSING ORDINANCE.
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ALTERNATIVES TO RECOMMENDATION
In addition to the recommendation, there are the following alternatives:
A. Request changes to the proposed ordinance and/or resolution, which, depending on the extent of the changes, may require the Commission to continue the item.
B. Take no action.
C. Indicate an intention to recommend denial of the proposed ordinance and/or resolution and direct staff to prepare a denial resolution for consideration at the November 3, 2026, Planning Commission meeting.
FINANCIAL REVIEW
All in-lieu fees collected under Chapter 16.036 are deposited in the Inclusionary Housing Fund and must be used to increase and improve the supply of housing affordable to moderate-, low-, and very low-income households in the City. As of October 15, 2026, the Fund has an unencumbered balance of $393,638, following the City Council’s appropriation of $220,000 on October 13, 2026, to the Claremont Temporary Housing Stabilization and Relocation Program. The City anticipates an additional $1,717,400 in in-lieu fees from the Taylor Morrison Park View development, for a projected unencumbered balance of $2,111,038.
The proposed code amendment does not change the in-lieu fee amount, which is established by City Council resolution. A by-right fee is expected to produce a more predictable revenue stream to the Fund. The amendment is also expected to reduce the staff time required to process discretionary in-lieu fee requests and to administer the initial sales and recordation of restricted for-sale units satisfied through the fee. The revised fee schedule resulting from KMA’s fee study will be presented to the City Council separately, and its financial impact will be addressed at that time.
The staff cost to prepare this report and administer this contract/project/program, estimated at $1,500, as well as the consultant costs for preparing the fee study, are included in the operating budget of the Community Development Department.
ANALYSIS
Background
The City Council first adopted an Inclusionary Housing Ordinance on July 25, 2006, applicable only to for-sale housing developments. The ordinance was amended in 2018 through Ordinance No. 2018, and again on September 28, 2021, through Ordinance No. 2021-04. The 2021 amendment established an inclusionary requirement for rental developments for the first time, consistent with the authority restored by Assembly Bill 1505 (2017), and adopted the current two-tier income structure:
• Rental projects: five percent low-income units and ten percent moderate-income units.
• For-sale projects: five Claremont low-income units and ten percent moderate-income units.
On May 23, 2023, the City Council adopted the current in-lieu fee schedule by resolution, based on a fee study prepared by Keyser Marston Associates (KMA). The schedule replaced a flat fee of $121,782 per inclusionary unit with a per-square-foot fee on a sliding scale by project size, currently ranging from $3.00 to $48.00 per square foot for ownership housing and $1.54 to $24.70 per square foot for apartments. The 2023 update was intended to align the fee with the gap between market-rate and affordable prices or rents, so paying the fee approximates the actual cost of providing an on-site affordable unit rather than offering a below-cost buyout.
City Council Study Session and Direction
City Council Objective 5.2 of the 2026-28 Council Priorities and Objectives directs staff to conduct a study session on the effectiveness of the Inclusionary Housing Ordinance and to identify potential amendments to further desired policy outcomes. On September 8, 2026, staff presented the City Council with a program update. Staff also asked the City Council to consider whether the by-right in-lieu fee, available to projects of five or six units, should be extended to projects of seven or more units.
After receiving public comment, the City Council directed staff to:
1. Amend CMC Chapter 16.036 to allow payment of the in-lieu fee by right for all for-sale housing development projects regardless of project size, including projects currently in the planning entitlement process; and
2. Conduct a fee study to establish an in-lieu fee that would incentivize developers to choose payment of the in-lieu fee.
The Code Amendment implements the first item. KMA, which prepared the 2023 fee study, is currently conducting the study to establish an in-lieu fee that encourages developers to pay it rather than provide on-site units. The study is anticipated to be complete when this Code Amendment is taken to the City Council in November 2026. The revised fee schedule will be adopted by City Council resolution and does not require Planning Commission review.
Ordinance Overview
The attached draft ordinance amends CMC Section 16.036.040 (Alternatives), with additions shown in underline and deletions shown in strike-through. The key changes are summarized below.
• By-Right In-Lieu Fee for All For-Sale Development Projects: Section 16.036.040.A is revised so that the developer of any for-sale housing development project subject to Chapter 16.036 may pay the in-lieu fee by right. The developer’s election must be identified in the inclusionary housing plan submitted under Section 16.036.050.A.1. The fee calculation, payment timing, deposit into the Inclusionary Housing Fund, and the prohibition on issuing a certificate of occupancy until fees are paid are unchanged.
• Discretionary Findings Limited to Rental Units: Section 16.036.040.C is amended so that its findings apply only to discretionary in-lieu fee requests for rental units. Those findings require the City Council to find that the project complies with the Administrative Manual, that providing units on-site or through land dedication would create an unreasonable and unavoidable economic hardship, and that the developer has exhausted options such as low-income housing tax credits, below-market government financing, and tax-exempt bonds. For-sale projects would no longer need to prepare the pro forma and financing documentation required to support a hardship request. Provision of the pro-forma has been a concern in the past as developers view much of the required information as proprietary and sensitive and; therefore, not appropriate to include in a public review process.
• Retained Alternatives: Developers may still provide inclusionary units on-site, and the land dedication alternative in Section 16.036.040.B, which requires City Council approval, is unchanged.
• Pending Applications: Uncodified Section four of the draft ordinance makes the by-right fee available, at the developer’s election, to any for-sale development project with an application pending on the effective date of the ordinance, including a preliminary application submitted under Government Code Section 65941.1. A developer electing the fee must submit a new inclusionary housing plan for approval by the Community Development Director. Because the amendment adds an option rather than a new requirement, applying it to pending projects at the developer’s election is consistent with the vesting protections for preliminary applications under State law.
Effect on On-Site Production
Making the fee by right, together with the fee study now underway, is intended to shift more projects toward paying the fee rather than building restricted units on-site, consistent with the City Council’s direction. On-site production will remain available, and two factors are relevant to how the developer determines which option to take:
• State Density Bonus Law: A density bonus, along with its incentives, concessions, and reduced parking standards, is awarded under Government Code Section 65915 in exchange for constructing affordable units on-site. A developer who satisfies the inclusionary obligation entirely through the fee does not qualify for a density bonus on that basis. This tradeoff is independent of the discretionary findings and will continue to give some developers a reason to build on-site.
• In-Lieu Fee Study: KMA’s fee study will recommend an in-lieu fee designed to make paying the fee the more attractive option for most projects. Until the City Council adopts a revised schedule, the 2023 fee schedule remains in effect.
In exchange, in-lieu fee revenue gives the City Council discretion over how funds are used under Section 16.036.080, including rental assistance, ADU grants and loans, pre-development loans, and assistance to housing development corporations. This can extend the benefits of a project’s inclusionary obligation to more households than a single on-site unit would. The amendment also eliminates the staff work required to market each restricted for-sale unit, verify buyer income eligibility, and prepare and record the inclusionary housing agreement, equity share agreement, and second deed of trusts for units satisfied through the fee.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities, General Plan, and 2026-28 Budget.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact Nhi Atienza at natienza@claremontca.gov.
Submitted by: Reviewed by:
David Crabtree Christopher Veirs
Interim Community Development Director City Planner
Prepared by:
Alex Cousins
Senior Management Analyst
Attachments:
A - Draft Resolution Recommending CC Approval with Draft Ordinance
B - 9/8/26 City Council Meeting Minutes