Promoting Impact Fees to Infuse Local Dollars into Affordable Housing

 In Great News

The Bay Area housing crisis has led to innovative solutions to affordable housing development. Over the past several years, one of the housing solutions GCC has helped implement to combat displacement is the adoption of residential impact and commercial linkage fees.

New development frequently creates additional housing needs. For example, the construction of a hotel can create low-wage jobs and the people employed in those positions need affordable homes. In these instances where an additional need for housing is created, cities can require commercial and residential developers to pay fees per square foot of affordable housing.

It can be incredibly time and resource intensive for cities to actually adopt these fees. They must hire and manage consultants to develop a formal understanding of the relationship between new development and local affordable housing needs, and conduct feasibility studies to determine how to structure fees without deterring development. Once the initial research is complete the fees must then go through a lengthy public approval process. These factors deter cities from adopting impact fees and in some cases, particularly for smaller jurisdictions, the study expense presents an insurmountable financial barrier.

Understanding that housing development for low and moderate income households is a regional necessity, and that affordable housing fees were not being applied as consistently nor effectively as they could be, GCC teamed up with the Silicon Valley Community Foundation (SVCF), the Cities Association of Santa Clara County, and Enterprise Community Partners to invite cities in Santa Clara and Alameda Counties that had not yet adopted both residential impact and commercial linkage fees to participate in the “Alameda County/Silicon Valley Joint Nexus Study Project.” 

GCC and SVCF worked with Baird & Driskell Community Planning to hire consulting firm Keyser Marston Associates to be the clearinghouse for all data and analysis, which made it more efficient for jurisdictions to join the project at their discretion. Twelve jurisdictions ultimately participated – Santa Clara County, City of Santa Clara, Milpitas, Campbell, Los Altos, Saratoga, Alameda County, Fremont, Union City, Albany, San Leandro, and Hayward. The cost of the Joint Nexus Study was divided amongst them based on population size, a major selling point as the joint model resulted in each city paying less than half of what they would have had they conducted the study on their own. The decision to conduct the study for the entirety of Alameda and Santa Clara counties from the beginning also made it easier to extract data for individual nexus studies for specific cities. 

Individuals from Baird & Driskell traveled across each of the counties to meet with representatives and encourage cities to participate. They experienced a domino effect – when one city joined the study that instilled confidence in other jurisdictions to participate. Neighboring cities were particularly interested so they would not be at a competitive disadvantage for development.

But the joint nexus study achieved more than simply getting participating cities and counties to think about residential impact and commercial linkage fees – some have adopted them! In June 2017 the Fremont City Council voted to approve fees unanimously, followed by the cities of Hayward and Santa Clara later that year. Fremont’s unanimous approval is particularly noteworthy. Back in 2009 the city council voted against a commercial linkage fee, suggesting there has since been a shift in favor of alternative affordable housing finance mechanisms.

Impact fees could infuse tens of millions of dollars into affordable housing in cities across the Bay Area. At a time when state and federal funding for such projects falls short, these local subsidy dollars are critical. While cities still have a ways to go, the work of GCC, the leadership of SVCF, and the support of our partners are propelling solutions in the right direction.

For a Bay Area example, read this blog from Smart Growth California, to learn more about how funders shifted the narrative of affordable housing impact fees in Silicon Valley.

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