Creating a landscape for more affordable housing takes a coordination of many factors, however, in this recent study done by the Terner Center for Housing Innovation at UC Berkeley, development fees are shown to slow down new development and add costs in restrictive ways.
California needs to build more affordable housing to bring down the high rental and real estate prices.
In the most basic terms, supply and demand is the reason California is experiencing a housing crisis. The state simply can't keep up with building at the pace of the demand for housing.
It may sound easy to just start laying out the tracks for new housing but it's much more complex than just constructing new buildings.
Development fees play a major role in the fight for more affordable housing. Developers face many roadblocks with the fees and end up taking their business elsewhere to avoid the headaches. This is one of the reasons California is facing a housing shortage.
So, what exactly are development fees?
Development fees, also known as impact or service fees, are collected by cities to pay for services needed to build new housing. The fees help offset the impact of new growth in the community and include steps such as environmental testing, securing zoning, inspections and obtaining building approvals and permits.
The idea behind development fees is that private developers should be paying for the services needed fo their projects without having to rely on taxpayer money. This is also a way for cities to generate revenue.
Development fees make up a big portion of the cost to build new housing in California cites.
How do development fees impact California cities?
Development fees can be either a deal maker or deal breaker for builders. Last year, Sacramento had one of the highest development fees in the nation, according to Builder, an online building news website.
In fact, the six highest market fees are all in California. Development fees are rising in California as the national average actually decreases. Between 2008 and 2015, California fees rose 2.5 percent, while the national average decreased by 1.2 percent during that same period, according to the 2015 National Impact Survey.
In a more recent report, the Terner Center for Housing Innovation at UC Berkeley analyzed seven California cities-- Oakland, Fremont, Los Angeles, Irvine, Roseville and Sacramento-- to examine the total fees charged by each city, the makeup of the fees and the information on development fees available to builders.
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