Developers in Oakland will soon have to pay affordable housing impact fees on housing projects for which a building permit application is submitted on or after September 1, 2016.
The Oakland City Council recently established affordable housing impact fees for individual projects according to the impact fee zone in which the proposed development is located. Thus, fees vary by individual sectors’ needs throughout the city.
Fees are calculated with the following formula:
impact fee = fee per housing unit X additional housing units
The ordinance defines “additional housing units” as the net number of units added to a parcel of real estate, less any units authorized by the city for remodeling, demolition or relocation.
Combined with standard capital impact fees and transportation fees, affordable housing impact fees range by zone and project type (multi-family, single family or townhome) from $4,600 – $8,500. However, Zone 3 — which comprises East Oakland — will only start charging affordable housing impact fees for building permit applications submitted on or after July 1, 2018.
Payment of the impact fee is to be made in two installments:
- 50% prior to the city’s issuance of a building permit; and
- 50% prior to the city’s issuance of a certificate of occupancy.
To avoid paying the fees, developers may allocate low- and moderate-income units in the proposed project or at another local site.
Additionally, developers may file applications for reductions, waivers or appeals in special circumstances, such as:
- absolute infeasibility of the fees and alternatives (unlikely); or
- the project does not create a need for below-market units.
Failure to timely pay fee installments results in:
- withheld building permits;
- special assessment liens filed against the property;
- non-issuance of certificates of occupancy;
- accrued interest from the date the fee was supposed to have been paid; and
- civil penalties, in addition to the prior recourses.
Developers who choose the alternative inclusion of below-market units who then fail to comply will be charged 150% the amount of the waived fee.
Dear Developers: Please don’t leave
The anticipated affordable housing impact fees paid to the city will be deposited into Oakland’s affordable housing trust fund. The city intends to use the fees to fund further restorative measures to balance its severely strained low- and mid-tier housing markets. Oakland desperately needs the revenue, having declared a state of emergency in April 2016 due to dire housing conditions.
Here’s the catch: Oakland won’t receive much funding if developers abandon the city and build elsewhere.
High fees are a quick deterrent for developers looking to pad their bottom line. Depending on the fee imposed in accordance with the zone in which the project is built, developers will need to add up to $8,500 per unit to their project budget. For example, a proposed multi-family project with 150 units in Zone 1 — set at $7,000 per unit — will cost a developer a total of $1,050,000 in impact fees.
Alternatively, developers may choose instead to build exclusively in the fee-free Zone 3 before 2018 — good for East Oakland residents, but earning no funds for the city’s housing measures.
Bay Area residents are already nervous about pushing out developers due to sluggish permitting processes and other new legislative costs. San Francisco recently passed an ordinance requiring new construction to have permanent solar energy systems; San Jose required new construction to allocate 15% of units for low- and moderate-income buyers. Thus, developers in the Bay Area ricochet pinball-style from city to city, looking for faster permitting and cheaper costs, only to bounce back from steeper and steeper fees and allocations.
The Bay Area cannot sustain itself without new developments to house residents of all income levels. Oakland’s altruistic intentions may cost its residents dearly when developers choose to forego hefty fees entirely in favor of sweeter prospects elsewhere.
Applying impact fees across the Bay Area
Consider this modest proposal: the Bay Area needs a regional zoning plan to level the playing field within all the cities around the bay.
Under such a regional zoning plan, cities can designate high-need zones where developers are able to obtain faster and cheaper permits — a process much more likely to help lower-income residents than existing escape routes available to developers through most rental ordinances and building codes. After all, large development companies can easily manage opt-out fees. To them, opt-out fees are but a small opportunity cost for constructing selective, expensive housing for elite buyers and tenants in a highly competitive market — simply the price of doing business.
A unified yet malleable regional zoning plan might counteract developers’ complaints by streamlining the permitting process in areas where residents will benefit most from new construction. A reduction of obstacles contending with developers’ desire to turn an expedient profit encourages more building in starving locales, a win-win for all. Once building increases and more low- and mid-tier residents find shelter, the Bay Area housing industry will stabilize, and residents long deprived of expendable income and saving power due to excessive costs of living will be able to start anew.
Although this sort of stabilization is yet a long way from realization — largely thanks to hindrances from obstructionist not-in-my-backyard (NIMBY) residents — the discussion of how to get there is accelerating. Action by Bay Area housing policymakers to reach a straightforward, widely applicable solution will grease the wheels.
Sadly our government has been unleashed with power to control every area. If you look up the Affordable housing Fee and why it is being used then you will understand what is happening in the new culture of facsim within our government. This includes new spreading the wealth housing venture our cities are implementing (look up the disadvantage commmunity Map) The cities are being forced to supply affordable housing which means they want everyone to have the same 500 square feet to live in. Affordable, equal, and all can live there. Look up http://www.youtube.com/user/grindall61. It explains whats happening across California and what our cities are being forced into implementing. Our businesses have no chance any more with regulations, and power hungry governments, and total lack of good decision making. Leona is totally correct in her ananlogy of what needs to happen.
Every Realtor needs to get behind the “Support of “By Right” Bill that is currently proposed to expedite growth and development to the fast track level. It was introduced by Assemblyman Richard Bloom, from Santa Monica and passed the Assembly on a 46-7 vote. Still needs tweaking but shows hope to developers of new housing in California. It needs to go viral statewide, city to city and streamline the process. Write Gov. Brown & emand some action to implement and stop the good ole boys & NIMBYs from killing projects that are zoned and consistant with each city & countys General Plan. Jobs and the economy drive the need for housing and we can”t afford bogus delays at the governmental & Planning depts.
William and Berry, well said. Builders/ Developers just trying to meet the need for housing in California. As someone once said, “Your home was new at one time too, why did we build your home? Because there was someone that wanted to live there. Now that you’re living in your home, we are not supposed to build homes for other people to live in?” Selfish, don’t you think?
Housing costs is a function of supply and demand. For too long restrictive land use policies have stifled supply and the resulting high demand has driven up rents and purchase prices.
Taxing the Builder/Developers for affordable housing is like taxing the Bakers because the cost of bread is too high. If society thinks houses cost too much Everyone should pay. The solution for high cost housing is very simple…more homes… and it does not entail convoluted governmental programs that now provide recipients of government assistance with better homes than working people can afford.
Cities can attract developers by offering incentives such as up zoning lots to higher density, reducing any and all building fees that are not directly related to a proposed project. Cities can streamline the review process so that projects come on line quickly. The cities can drop mandates for the size of units, thus allowing smaller, less expensive units.
All of this would also stimulate the economy, provide jobs and reduce the roles of those needing government assistance…It takes good leadership to stand up to those selfish interests that obstruct progress and demonize the very people most able to solve the problem of high cost housing.
Barry Freeland: Good to know you are still in the business and I so agree with your comments. If there was a fast track and consistent procedure for Planners to simply do their jobs, more affordable would be built. It’s the sluggish way they control the economic swings and often kill the deals with the illusion that the Developers” are the fat cats. The back log is created by lack of decision making and outdated General Plans and inconsistent zoning Ordinances that are a band-aid non-solution for jobbers who simply want to pass the buck to the State law that mandates the fair share rule. Time to hold the powers that be to perform in a more efficient way in the 21st Century.
“Affordable housing FEE” is such an oxymoron. Remember the fee increases the price by more than just the fee; add in @15% G&A, interest on the extra costs. Then the borrower pays expanded fee, plus extra interest and property taxes on the higher price. And as we have just seen in Santa Rosa, the fees received have a way of disappearing into the general fund expenditures. What a scam. Government created the problem by restricting supply. Ask any elected official when they will be imposing an affordable [e.g. food, car, clothing, etc] fee.