Comstock's magazine 0119 - January 2019 - Page 38

n DEVELOPMENT L eah Miller, the CEO of Habitat for Humanity of Greater Sacramento, can tell you exactly what Sacramento’s latest decision on affordable housing will mean for the people she serves. In October, the City Council voted to zero out development impact fees on affordable housing projects. Now Habitat homes each will cost $2,400-$12,000 less to build — relief that will help boost Habitat’s annual production to 16-18 homes a year. That’s double the organization’s current rate of helping 7-9 families build affordable homes each year, according to Miller. And help is needed: In 2018, a record 800 people applied to qual- ify for one of the seven Habitat homes to be built in 2019. “It takes about 300 different individuals, foundations and corporations each year and thousands of volunteers to build Habitat homes,” she says. “We’re thrilled to add the City to that collaboration of people who make it possible.” Fees are the single biggest cost driver on a Habitat project, since much of the labor is donated by volunteers and the recip- ient families themselves. But it’s not just affordable housing de- velopers who say fees drive up costs: In 2015, average impact fees in California were more than $23,000 for a single-family home and almost $20,000 per multifamily unit. Statewide, impact fees are almost three times the national average and grew 2.5 per- cent between 2008 and 2015 — and a whopping 19 percent for new single-family homes — a period when they fell nationally by 1.2 percent. California’s median home price is $572,000, more than double the U.S. median of $221,500. Statewide, impact fees are almost three times the national average and grew 2.5 percent between 2008 and 2015 ... a period when they fell nationally by 1.2 percent. Sacramento and other area jurisdictions are trying a supply-side approach to bringing down housing costs by cut- ting, deferring and improving the predictability of builders’ development fees. It’s a rare test of whether changing how fees work can help kick off a building boom to meet the region’s dire shortage of affordable homes and apartments. 38 | January 2019 THE FEE EXPERIMENT Sacramento’s recent waiver is the most radical effort to make it easier for developers to build, but other jurisdictions are trav- eling the same path. California municipalities don’t have a ton of other tools to address housing issues on the local level. The 1978 passage of Proposition 13 capped property taxes, cutting into the money that cities rely on to build infrastructure. When the state shut down its local redevelopment agencies in 2012, it removed a last steady source of funding for infrastructure and affordable housing development. Sacramento and other municipalities use those impact pay- ments to cover the cost of city infrastructure for new residential development. Together, Proposition 13 and the end of redevelopment meant cities and towns were forced to fund their infrastructure on the backs of developers constructing new housing. Builders passed the costs along to homebuyers and renters. “Fees are tied to the construction of, generally speaking, pretty useful things — traffic improvements, bike lanes, improvements to in- frastructure and so forth,” says David Garcia, policy director of UC Berkeley’s Terner Center for Housing Innovation. “Because of our tax structure, it’s very hard for cities to find the money to pay for these things.” Can changes like Sacramento’s make a significant dent in supply? Even before the waiver, the city had relatively low fees. A March 2018 Terner Center report found that of seven sam- ple cities studied (Sacramento, Roseville, Oakland, Berkeley, Fremont, Los Angeles and Irvine), Sacramento’s impact fees were the lowest for single-family homes and second lowest for multifamily units. But even those low fees haven’t stimulated enough build- ing. Census Bureau data show that the city saw fewer than 900 single-family and multifamily residential units constructed per year between 2010 and 2018. A September 2017 analysis done for the city and the Capitol Area Development Authority by BAE Ur- ban Economics concluded that the current pipeline of residen- tial projects would undersupply affordable housing to low- to moderate-income worker households by “a significant margin.” Garcia says there isn’t much literature on whether cutting fees can stimulate housing development because few munici- palities have actually tried it. In one that did — Stockton — fee reductions designed to encourage residential development didn’t result in much building because demand was lacking, he says. The town of Truckee may be a fraction of Sacramento’s size, but it’s in the throes of a housing crisis every bit as dire. A 2016 housing study found that the North Tahoe-Truckee region needs 12,000 more apartments or houses for its workforce. For near- ly half of the region’s residents, housing costs are more than 30 percent of their income — the level at which households are con- sidered “burdened” by their housing costs. The area’s median