California housing crisis: Development fees unpredictable, stifle construction

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.

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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.”

Source: FS – All – Real Estate News 1
California housing crisis: Development fees unpredictable, stifle construction