California housing crisis: Development fees unpredictable, stifle construction

Report suggests reform of local impact fees

Construction workers work on building model homes on Seaward Court at the Delta Coves housing development in Bethel Island, Calif. on Monday, April 8, 2019. Construction has begun on model homes at this marina community that has been decades in the making. The Delta Coves will feature 419 upscale waterfront homes with private boat docks and a clubhouse. (Jose Carlos Fajardo/Bay Area News Group)

Author: Louis Hansen

Date: August 8th 2019

Published: Marin Independent Journal

Want more homes and apartments built in the Bay Area?

Then cities need to help developers with more transparent, consistent and lower fees, according to a new study done for the state Legislature.

“This is a call to be reasonable,” said Assemblymember Tim Grayson, D-Concord, sponsor of the bill that authorized the study. “There’s no one answer to the housing crisis. This has been a long time coming.”

The fees are one part of the debate between housing advocates, developers and municipalities as the state’s housing shortage drives up prices for homes and apartments. State planners estimate California is 3.5 million homes and apartments short of meeting the housing needs of its population. The report also recognized that California cities, limited in raising property taxes by Prop 13, lean heavily on impact fees to pay for services and upgrades to roads and utilities.

The study by the Terner Center at UC Berkeley, released this week by the state Department of Housing and Community Development, is expected to be used by lawmakers to consider an overhaul of impact fees.

Grayson plans to amend a bill on impact fee reform, AB 1484, to include recommendations from the report. The bill, which is pending in a Senate committee, has a deadline to reach Gov. Gavin Newsom by mid-September.

Critics say the fees hamper development and drive up prices in a market already the most expensive in the nation. Proponents say the charges are a vital tool to get developers to pay for community growth and disruption.

Cities depend on impact fees to build roads, schools and maintain parks and water systems. The money also allows municipalities to recoup costs for staff time spent on the projects. In an earlier study, Terner Center researchers found impact fees increased the cost of new units in some cities by up to 18 percent. California’s fees were nearly triple the national average.

In the new study, researchers looked at 40 California municipalities to examine the fee structure, transparency and how jurisdictions use the money. Researchers also considered different options to fund municipal projects and services.

“Cities rely on these fees mainly because they have their hands tied,” said David Garcia, policy director at the Terner Center.

The study found fees vary in size and scope from city to city. Researchers focused on a specific category of fees in 10 cities, including Oakland and Fremont, and found the charges on a typical project varied by as much as $19,100 per unit on apartments and other multifamily projects, and nearly $30,000 per unit on single family homes. Garcia said fees for parks and utilities add additional costs to the project.

If state lawmakers want to encourage more housing construction, researchers suggested requiring cities to establish fees early in the project, provide more justification for charges, and consider reducing fees on accessory dwelling units, or AUDs.

The study also suggested making it easier for builders to calculate total fees on a project through schedules posted on web sites.

Fremont city councilman Vinnie Bacon said impact fees are vital to the city to pay for roads, schools and parks. The school district has struggled to keep up with a growing population, he said.

“Development should pay its own way,” Bacon said. “I don’t think (the fees) go far enough.”

Paul Campos of the Bay Area Building Industry Association said developers need more clarity of the cost before embarking on a project. Unexpected fees can make a project that was designed for middle class workers end up a high-end development outside the budget of many Bay Area families, he said.

The current schedule of fees often forces new homeowners and renters to carry an unfair share of the burden to maintain and upgrade city services. “In most circumstances,” Campos said, “some or all of those fees are passed on to renters and buyers.”

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