Calif. City, School District Lower Impact Fees

The city of Menifee in Riverside County and the Scotts Valley Unified School District in Santa Cruz County are the latest California jurisdictions to significantly reduce fees charged to homebuilders, which the California Building Industry Association said is a growing trend that is paying off.
The Menifee City Council voted 5-0 on May 20 to lower its development impact fees by $2,585.70 per single-family home, down from the previous fee of $5,185. The council also reduced staff hourly billing rates by 20 percent and will formalize a new streamlined entitlement process for development applications.
And in a further effort to boost new-home construction and sales, the city is also working to establish a Menifee Money Program that will provide a gift card for new-home buyers to be used at Menifee businesses which will be equivalent to 50 percent of the first year’s property taxes.
The fee reduction will be in place for one year beginning on July 1 and ending on June 30, 2010, or upon the issuance of 500 permits, whichever comes first.
And the Scotts Valley school district, which had the highest school district impact fees in Santa Cruz County, on May 12 slashed the amount charged from $6.31 per square foot to $3.27. On a typical 2,000-square-foot home, this reduction of nearly 50 percent will reduce fees from $12,620 per home to $6,540.
Mick Pattinson, a San Diego County-based homebuilder and Chair of CBIA’s Impact Fee Task Force, said the two reductions were welcome and should be followed by other jurisdictions around the state.
“During the housing boom, many jurisdictions sharply raised the fees they charge new-home builders – and thus new-home buyers – by tens of thousands of dollars per home. The average total impact fee today for each new home 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 Menifee and the Scotts Valley school district recognize market realities. Reducing these fees help make projects financially feasible, and in many cases should lead to increased homebuilding activity.”
Housing production plummeted from nearly 213,000 homes and apartments in 2004 to just 65,000 in 2008, and is projected to fall to less than 45,000 units this year. That has cost the state an estimated 363,000 jobs, $46 billion in economic output, $2.2 billion in tax revenues to the state and $426 million in revenues to local government.
Other jurisdictions 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; Thousand Oaks in Ventura County; and Woodland in Yolo County.
In addition, more than 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 projects pencil out financially.
Pattinson noted that fee reductions or deferrals have sparked increased construction in many communities as the reduced costs made homebuilding 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.
“I believe that when the housing recovery comes it will be the cities with the lowest fees that will benefit first. Builders (and financiers) are closely watching the fee burdens and those jurisdictions that substantially lower fees will get the early recovery in new-home construction,” Pattinson said.

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More on Mick Pattinson, including a CEO Spotlight profile