Morgan Hill
October 27, 2018

Morgan Hill: Adopts In-lieu Fees for Inclusionary Housing Ordinance


On October 17th, the Morgan Hill City Council took action to set in lieu fees for its Inclusionary Housing Ordinance, which was approved in July of this year. For projects outside of the downtown, Morgan Hill’s ordinance requires that 15% of the homes be affordable. For those that are located in downtown, 10% of the homes must be affordable.

State law requires that an inclusionary ordinance provide alternative means of complying with these requirements. One of the most common alternatives is payment of a fee in lieu of on-site production. In lieu-fees are generally paid into a housing fund and used to finance affordable housing developed off site.

Morgan Hill’s approved fees per square foot are listed in the table below.

For Sale Rental
Downtown $13.20 per square foot $14.50 per square foot
Outside Downtown $19.70 per square foot $29.00 per square foot


Morgan Hill has adopted incentives for developers to build affordable units on site through a Residential Development Control System (RDCS), which allots more points to projects that include on site affordable units.  As a result of this incentive, the City has plans in place to meet its Regional Housing Needs Allocation (RHNA) goals in the current RHNA period.

SV@Home advocates for inclusionary housing requirements as an important tool in a local jurisdiction’s affordable housing toolbox. While on-site development is always preferred, any in lieu fees collected will continue to promote affordable housing opportunities in Morgan Hill.