Pay to Play, Residential Development Fees in California, 1999

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Pay to Play, Residential Development Fees in California, 1999 Prepared for Department of Housing and Community Development (HCD) under interagency agreement with University California Berkeley’s Institute of Urban and Regional Development, with publication support and assistance from HCD staff members Mario Angel, Carl Bray, Lynne Sekas and Therese Weathers-Reyes. _________________ For questions about the report, please contact the Division of Housing Policy Development (HPD) at (916) 445-4728. To view or download a copy of the report, visit our website at: www.hcd.ca.gov. The Appendix to this report is included on CD-Rom located in the back cover of the report. HPD’s mailing address is: P.O. Box 952053, Sacramento, California, 94252-2053. PAY TO PLAY: RESIDENTIAL DEVELOPMENT FEES IN CALIFORNIA CITIES AND COUNTIES, 1999 STATE OF CALIFORNIA Gray Davis, Governor Business, Transportation and Housing Agency Maria Contreras-Sweet, Secretary Department of Housing and Community Development Julie Bornstein, Director Division of Housing Policy Development Cathy E. Creswell, Deputy Director Linda M. Wheaton, Editor and Project Manager Prepared by John Landis, Michael Larice, Deva Dawson, and Lan Deng Institute of Urban and Regional Development University of California, Berkeley August 2001 Table of Contents Executive Summary.................................................................................................................................. 1 Chapter 1: Introduction............................................................................................................................ 9 Chapter 2: Residential Development Fees—The California Context A Brief History of Development Fees in California ....................................................................... 11 The Economic Logic of Development Fees.................................................................................. 16 The Legal Basis of Fees in California .......................................................................................... 17 Results of Prior Fee Studies ........................................................................................................ 21 Chapter Summary........................................................................................................................ 24 Chapter 3: Research Design and Survey Methodology Research Design and Sample Selection...................................................................................... 25 Surveying Procedures.................................................................................................................. 29 Chapter 4: Who Charges Which Fees? A Typology of Fees...................................................................................................................... 31 Charges Which Fees? ................................................................................................................ 36 Fee Waivers ................................................................................................................................ 47 Statistical Analysis ....................................................................................................................... 47 Nexus Studies.............................................................................................................................. 49 Chapter Summary........................................................................................................................ 57 Chapter 5: How Much are Local Fees? Surveying the Range of Fees....................................................................................................... 59 Average Fees............................................................................................................................... 64 Fee Composition and Variability .................................................................................................. 69 Regional and Sub-Regional Fee Variations. ................................................................................ 71 Fee Comparability Across Housing Types……............................................................................ 76 Fee and Community Characteristics……..................................................................................... 77 Do Fees Substitute for Debt?....................................................................................................... 82 Chapter Summary........................................................................................................................ 85 Chapter 6: Fees and Housing Prices Fees as a Share of New Home Prices ......................................................................................... 87 Housing Fee-Price Ratios and Community Characteristics.......................................................... 89 Fees as a Share of Apartment Costs........................................................................................... 90 Would Reducing Fees Help Restore Housing Affordability?…..................................................... 94 Chapter Summary........................................................................................................................ 99 Chapter 7: Conclusions and Policy Implications Summary of Key Findings.......................................................................................................... 101 State Policy Issues and Options ................................................................................................ 106 References……………….. .....................................................................................................................................109 Table of Contents (continued) List of Tables Table 1: The Contribution of Selected Fees and Service Charges to Local Revenues, 1983-84, 1996-1997................................................................................................. 12 Table 2: Sample Jurisdictions by Region and Sub-Region (1998 populations in parentheses).28 Table 3: Fee Distribution by Type of Fee, Jurisdiction Type, and Region………. .................. 36 Table 4: Fee Distribution by Region and Community Characteristics: Statistical Results ...... 48 Table 5: Nexus Study Availability and Currency Among the Survey Sample.................... 52-54 Table 6: Residential Development Fees in Selected Suburban Communities ....................... 61 Table 7: Average Residential Development Fees by Project Type and Region..................... 64 Table 8: Development Fees by Project Type, Jurisdiction, and Region ............................ 67-69 Table 9: Average, Minimum, & Maximum Residential Development Fees by Project Type... 72 Table 10: Average Subdivision Home Fees by Region and Fee Type..................................... 73 Table 11: Average Fees by Region, Sub-Region and Fee Type.............................................. 75 Table 12: Fee Correlations Across Housing Types.................................................................. 77 Table 13: Regression Results: Single-Family Fees as a Function of Jurisdiction Growth & Characteristics...................................................................................................... 79 Table 14: Regression Results: Single-Family Fees as a Function of Community Characteristics and Region 1............................................................................................................ 81 Table 15: Regression Results: Single-Family Infrastructure Fees as a Function of Per Capita Indebtedness ........................................................................................................... 84 Table 16: Sample Jurisdictions by 1999 Fee-Price Quartile..................................................... 87 Table 17: Average Fee-Price Ratios by Region....................................................................... 88 Table 18: Regression Results: 1999 Fee-Price Ratios as a Function of Community Characteristics ......................................................................................................... 89 Table 19: Fees as a Share of Total Development Costs in Six California Apartment Markets, 1997......................................................................................... 93 Table 20: Simulated Effects of 50% Fee Reduction on Homebuyer Affordability................ 94-95 Table 21: Simulated Effects of 50% Fee Reduction on Rent Levels in Six Prototype Apartment Projects................................................................................................... 98 List of Charts Figure 1: Per Unit Residential Fees, by Region and Project Type .......................................... 65 Figure 2: Residential Fees, by Region and Project Type (per $ valuation).............................. 66 Figure 3: Composition of Average Residential Development Fees, by Project Type .............. 70 Appendices: (*located in back cover) Appendix A: Survey Instrument.........................................................................................CD-Rom* Appendix B: Fees by Type and Jurisdiction ......................................................................CD-Rom* Appendix C: Fee Surveys by Jurisdiction..........................................................................CD-Rom* ii In the more than 20 years since the passage of Proposition 13, development fees have become an integral part of California’s fiscal landscape. Permit fees, development fees, dedications, in- lieu fees, and exactions are especially important in new and growing suburban
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