California Seeing Impact Fee Cuts and Deferrals
In a move that is paying off for a growing number of communities around the state, the California Building Industry Association (CBIA) on May 15 reported that the city of Thousand Oaks was the latest jurisdiction to reduce development fees in an effort to jump-start home building and its local economy.
The Thousand Oaks City Council voted early this month to eliminate its affordable housing fees until June 30, 2010, after hearing from its staff that builders could not afford to pay the fees — $9,000 per single-family home and $25,000 per condominium or townhome — given current market conditions.
The council is expected to adjust the fees to more sustainable levels next year based on the economic climate at that time.
On May 12, CBIA reported that the Corona City Council had voted to slash development impact fees by 40% for the next two years in an effort to stimulate the local economy and to put people back to work. The move was expected to reduce the cost of build a new home there by an average of $7,700.
Mick Pattinson, a San Diego County-based home builder and chair of CBIA’s Impact Fee Task Force, said the most recent council decisions were welcome and should be followed by other city and country governments.
“During the housing boom, many cities and counties sharply raised the fees they charge new home builders — and thus new-home buyers — by tens of thousands of dollars per home. The average impact fee today is about $50,000 statewide, and there are many jurisdictions where the fees total more than $100,000 — nearly as much as it costs to actually build many homes,” Pattinson said.
“With home prices today half of what they were three or four years ago and builders struggling to compete against repossessed homes being sold well below the cost it took to build them in the first place, it’s welcome news to hear that Thousand Oaks recognizes market realities and is trying to jump-start construction, which is such an important component of the state and local economy,” he said.
Other communities around the state that have reduced fees in recent months include Fremont and Dublin in Alameda County; Oakley in Contra Costa County; Orange County and the cities of Irvine and Santa Ana; Beaumont and Corona in Riverside County; San Diego County; and Woodland in Yolo County.
In addition, nearly 50 jurisdictions statewide have deferred their fees from the time the building permit is pulled until the home is sold, which reduces the up-front costs to builders and helps make more properties pencil out financially.
Pattinson noted that fee reductions or deferrals have sparked increased construction in many communities as the reduced costs made home building projects financially feasible. For example, after Chula Vista in San Diego County deferred its fees in March, builders quickly obtained more than 80 building permits. During the first two months of the year, only two permits had been pulled in the city.