In the latest bid to combat California’s affordable housing crisis, state lawmakers on Monday announced a package of bills to limit development fees that can add tens of thousands of dollars to the price of a new home.
However, local governments depend heavily on the fees, which typically are used to fund schools, roads and parks. Lawmakers said they were discussing those needs but have not yet decided how the fees might be replaced.
The fees are “vital to local government’s ability to pay for the infrastructure that residents living in new developments need,” Chris Lee, legislative representative for the California State Association of Counties said in a statement. He said counties are glad to hear that “providing state funding to make local governments whole for any fee caps or reductions will be part of the discussion.”
Local Fees Can Increase Home Prices by Nearly 20%
Development-related fees, also known as impact fees, can provide up to a third of some cities’ budgets, according to a report last year by the University of California, Berkeley, Terner Center for Housing Innovation. They vary widely depending on location, the center found, amounting to anywhere from 6% to 18% of the median price of a new home.
“Impact fees, while well intentioned, have been an incredible impediment to development,” said Assemblyman David Chiu of San Francisco, chairman of the Assembly’s housing committee.
The Democratic state lawmakers cited a 2018 study by the Terner Center that found fees of as much as $157,000 in the San Francisco Bay Area city of Fremont, topping $140,000 in Irvine in Orange County and $60,000 in Oakland. They added about $30,000 to the price of a new home in Los Angeles and $20,000 in Sacramento.
Significant Impact on First Time Buyers
They can be especially hard on first-time home buyers, minorities and the working class, said Assemblyman Tim Grayson of Concord, who is carrying five of the eight bills in the package.
One is intended to change the standards that cities and counties use to determine their fees, while another would cap fees based on the median home price in a jurisdiction. Another would require local governments to assess the fees on a per-square-foot basis, which Grayson said would allow developers to build smaller, more affordable units without being hit with multiple fees.
Two other bills address affordable housing, one by having the state reimburse local governments that waive impact fees on affordable projects, the other by reducing impact fees on affordable housing built in densely populated areas.
Other bills would gather more housing data, make it easier for developers to pay impact fees under protest, and increase public notice when local agencies seek new or increased fees or service charges.
Cities Use Fees To Support Local Services
Assemblyman Todd Gloria of San Diego said lawmakers are looking to find more money to help cities with housing development, while Grayson said communities ultimately benefit from those developments through property taxes.
“Any successful strategies will require a sustainable long-term funding commitment from the state and sufficient revenue to provide services to current and future residents that they not only deserve, but require,” League of California Cities spokeswoman Jill Oviatt said in a statement.
The proposals had support from Laine Himmelmann, development director for Habitat for Humanity of Greater Sacramento, who said the “often crippling fees” can stunt home ownership for lower income families.
“It’s a huge cost and it’s hard to understate the impacts on home buyers,” said California Building Industry Association legislative advocate Andrew Kosydar, whose organization supports the bills. “Unfortunately, one of the few mechanisms they (local governments) have available to them is developer fees.”