CSAC Bulletin Article

Report Recommends Changes to Residential Impact Fee Programs

August 8, 2019                               

The California Department of Housing and Community Development (HCD) released the Residential Impact Fees in California report earlier this week, which evaluates local fees charged to new housing developments.

The report was prepared pursuant to Assembly Member Grayson’s AB 879 (Chapter 374, Statutes of 2017), which directed HCD to study the reasonableness of local fees charged to new developments pursuant to the Mitigation Fee Act. UC Berkeley’s Terner Center for Housing Innovation conducted research and drafted the report for HCD.

In anticipation of the release of the report, Assembly Member Grayson introduced AB 1484 earlier this year with the intention of amending it to include the recommendations outlined in the report upon its release. Though the report was published a little over a month after its June 30 deadline and very close to the end of the legislative session, the Legislature may be interested in moving a bill to implement the recommendations included in the report.

While bills moving forward this year already reflect several recommendations in the report, CSAC will advocate that any major changes to local development impact fees be considered in the second year of the legislative session to allow for a collaborative process with affected stakeholders.

As a reminder, CSAC’s Housing, Land Use and Transportation Policy Committee approved draft housing impact fee principles at the 2019 Legislative Conference. Stay tuned for further updates on this issue when the Legislature reconvenes for the last month of session next week.

Key recommendations from the report by topic include:

  • Fee transparency: The report suggests increasing fee transparency and predictability of fees by requiring jurisdictions to:

    • Clearly post nexus and feasibility studies on their websites.
    • Post clear, comprehensive and up-to-date development fee schedules.
    • Make annual fee reports easily available to the public.
    • Confirm availability of fee schedules and annual fee reports in their Annual Progress Reports.
    • Provide fee estimates and public guidance on calculating development fees.
  • Fee structure: The report suggests the following to structure impact fee rates in a way that encourage housing and affordability:
    • Determining fees earlier in the development process.
    • Requiring jurisdictions to consider alternative multipliers for fees and to justify their choices.
    • Considering other options to reduce fees for ADUs and to promote development of ADUs. 
    • Requiring jurisdictions to determine if separate fees for infill and greenfield developments are necessary and calculating those fees separately based on cost to bring service to the project.
    • Establishing additional nexus guidelines for inter-jurisdictional fees at the state level.
  • Fee design: The report suggests improving the fee design process in efforts to lower the cost of impact fees by:
    • Setting guardrails on the levels of service or investment that can be considered in a nexus study.
    • Requiring jurisdictions to establish stronger links between the fees they charge and the actual impacts of a specific development.
    • Establishing a feasibility standard for determining fee amounts.
    • Capping impact fees based on a set formula.
  • Alternative funding options: The report suggests the following to improve local financing for infrastructure:
    • Requiring jurisdictions to justify why an impact fee is the most appropriate mechanism to fund the proposed infrastructure.
    • Building local capacity to use other forms of infrastructure funding.
    • Revisiting ways to better support local infrastructure and planning, including statewide tax reform.
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