Building a house in California is expensive. These new proposals would slash city fees

California Democrats unveiled on Monday a package of eight proposals that attempt to spur construction of new homes by slashing some of the fees that local governments charge for building permits.

Those fees can run into the tens of thousands of dollars per house, driving up the cost of construction and leading developers to favor luxury homes over affordable ones, advocates say.

One new proposal would direct cities to set charges on the square footage of a project, which could free developers to build smaller units for a lower cost. Another would use state funds to reimburse local governments that waive impact fees on affordable units.

One more would create a “ceiling” for fees based on the region’s average home price.

“From Oakland, to Fresno to Los Angeles to San Diego, I heard from both affordable and market-rate builders that development impact fees were a major cost driver,” said Assemblyman Tim Grayson, D-Concord. “In some cases, adding so much to the cost of construction that a project had to be scrapped entirely.”

Fees can hike development costs on new homes by 17 percent, according to a 2018 report from the UC Berkeley Terner Center for Housing Innovation.

The average home in California cost $592,450 in 2019, a 4 percent increase from 2018, according to the state Department of Finance. In December, the median price of a home was $615,000, a double-digit increase from a year prior.

Approved housing units also dipped from 118,000 in 2018 to 111,000 in 2019, a near 6 percent fall. Gov. Gavin Newsom said during his 2018 campaign that he wanted to see 3.5 million units built in California by 2025, which would be a yearly average of 500,000.

Assemblyman David Chiu, who chairs the Assembly Housing Committee, said the state has to target impact fees to speed up construction.

Chiu wrote the 2019 law to limit dramatic rent increases in California. This year, he wants to lower impact fees on affordable projects built through the state’s density bonus law.

“During the worst housing crisis in California’s history — when housing units can cost upwards of $800,000 per door in my city of San Francisco, and impact fees can account for up to one-sixth of the cost of each unit — we have to think differently,” Chiu said on Monday.

Assemblyman Jesse Gabriel, D-Encino, said too often unexpected and large fees block or delay new homes. His bill would allow developers to contest a high fee without halting construction. They’d have to pay the fee, but could simultaneously negotiate another amount while the project continues.

“If we could cut (fee) prices in half, that would go a long way in addressing some of the affordability issues,” Gabriel said.

That idea will require some convincing. Cities helped tank the high-profile Senate Bill 50 earlier this year that would have required local jurisdictions to plan for more units around transit- and job-rich areas.

“Finding the most effective strategies to spur housing is a top priority in California and the League is currently reviewing the proposals in the recently introduced package of housing bills,” said Jill Oviatt, spokeswoman for League of California Cities, which opposed the SB 50. “The League is a ready partner to find approaches that effectively address housing and homelessness.”

This story was originally published February 24, 2020 at 3:37 PM.