Housing elements are no longer just a paper exercise. The California Department of Housing and Community Development (HCD) has made it clear that in order to meet the Regional Housing Needs Allocation (RHNA) cities need to do more than just plan to build, they also need create the zoning and financial feasibility conditions that will help the Bay Area reach its ambitious housing goals.
Since the pandemic, hikes in interest rates coupled with skyrocketing construction costs have caused housing production to stall as the cost to build has become too expensive. While high-interest rates and construction costs are out of our control, one of the barriers to construction HAC has been focused on examining is “impact fees.”
Each city charges a range of impact fees as a cost of new development as a way of generating funds for the expansion of public infrastructure needed to support new housing. These include payments toward public services like parks, affordable housing fees, and public transit. As a general principle, HAC has always been supportive of the impact fee model. Requiring homebuilders to invest in the places they build can help create more vibrant and sustainable communities. However, the data has shown that fees in certain cities have become so exorbitant that they actually disincentivize new development.
For example, in the city of Sunnyvale, the park-in-lieu fee for multifamily housing projects $72,527 per-unit. This is 300% higher than the average in Santa Clara County, as nearby cities like Palo Alto ($47,893 per unit) and Los Altos ($48,800 per multi-family unit) have significantly lower park-in-lieu fees than neighboring Sunnyvale. After examining Sunnyvale’s overall fee package, it’s evident that the impact fees Sunnyvale imposes on new housing development have become a significant barrier to housing production.
After months of engaging with the city on the multi-family park in-lieu fee, Sunnyvale, in their most recent draft, has since reduced the park fee for lot splits, but has still not addressed the exorbitant overall fee package for multi-family development. The Housing Action Coalition has been in regular contact with HCD, making them aware of these concerns.
Since the latest draft, Sunnyvale city staff have stated that HCD does not care about financial feasibility. However, as of last week, the state rejected Sunnyvale’s most recent draft of the Housing Element, explicitly outlining the city’s exorbitant impact fees as one of the reasons for their rejection. Their rejection letter indicates that “the City should analyze its $72,560 park in lieu fee applied to all multifamily units.”
Moving forward, we’re committed to working with the Sunnyvale and cities across the region to ensure a pro-housing Housing Element that will help the Bay Area reach its housing goals.