Reduce builders’ fees to make housing more affordable

As anyone who has tried to buy a home in the past year knows all too well, California’s housing costs are soaring. The primary reason is basic economics – there is a strong demand for housing and a limited supply because not enough homes have been built over the past two decades to meet that demand. 

But a recent study has made it clear that increasingly high fees charged to builders by cities, counties and special districts, and ultimately paid for by homebuyers, is a major cost factor as well, and one that can be addressed.

As elected officials working to add to our communities’ housing supply and to improve affordability, we urge city councils, school boards and boards of supervisors around the state to ensure that their fees are appropriately scaled so that it’s easier, not harder, for families to buy – and homebuilders to provide — the new homes our state so badly needs.  

Builders have reported for years that high fees have been a problem in many coastal areas. But a recent report prepared for the North State Building Industry Association shows that the total fee burden in our area now averages an astonishing $95,000 for each new homebuyer. 

Some of these fees pay for essential items — basic infrastructure like roads, water treatment, schools or parks. However, the study revealed that similar communities in the Central Valley and the Inland Empire region of Southern California — areas similar in nature and lifestyle to Sacramento — see much lower fees than Sacramento for these same amenities. 

The fees in those two regions average a full $40,000 per home lower than what Sacramento homebuyers generally pay. These findings clearly show that fees hurt the region’s affordability and put homeownership out of reach for thousands of area families. 

In our region, every $1,000 increase in price prevents 936 families from affording an average home. That translates to some 37,000 local families who are being priced out from buying a new home right now. 

The fees affect affordability for middle-income homebuyers as well as low-income families looking for government-sponsored housing options. Affordable-housing builders must pay fees as well. And when middle-income families cannot afford a new home, it prevents them from moving out of their condos or smaller homes, creating gridlock and blocking opportunities for poorer families wishing to climb the homeownership ladder.

Eliminating the additional $40,000 in government fees would save the average homeowner $175 per month, $2,000 per year and an incredible $60,000 more over the course of a 30-year mortgage. 

The study was conducted by Economic and Planning Systems, a firm that provides expertise on real estate and land use for public- and private-sector clients across the country. It recommends that local jurisdictions cut fees to spur more homebuilding to boost supply; reduce or remove unnecessary amenities to bring fees down; and use local funds for larger amenities that benefit entire communities.  

Local governments throughout the state can examine how Lodi, Clovis, Riverside and Ontario have been able to keep fees so much lower than Sacramento before they approve new fees. 

The Legislature is considering Assembly Bill 602 to standardize local fee calculations and to create greater accountability and transparency in fee calculations and payment methods. This legislation should be passed, but with additional provisions so that local governments may reduce and eliminate unnecessary fees. 

Also, because some fees are the result of state mandates for goals such as better water quality or helping fund affordable housing, other methods to fund these essential needs should continue to be explored to reduce the burden on the next generation of homeowners. 

As discussions around a bipartisan federal infrastructure package and state budget talks continue, members of Congress and state legislators should be open to working further with local governments. Allocating funds to support broad societal benefits like parks, water and sewer infrastructure improvements and affordable housing would help ensure equity of these needs throughout the state.

Bringing housing demand and production into better balance would help improve affordability, but so would reducing costs to produce housing. And we know that is possible.